The Editions Sorbonne is wholly owned by the university. It performs the bulk of its work for other university departments, which pay as though the Editions Sorbonne were an outside business enterprise. The Editions Sorbonne also publishes and maintains a stock of books for general sale. A job-costing system is used to cost each job. There are two direct-cost categories (direct materials and direct manufacturing labour) and one indirect cost pool (manufacturing overhead, allocated on the basis of direct-labour costs).
The following data (in €000) pertain to 2015:
Direct materials and supplies purchased on account......................................€800
Direct materials used............................................................................710
Indirect materials issued to various production departments..............................100
Direct manufacturing labour...................................................................1300
Indirect manufacturing labour incurred by various departments...........................900
Depreciation on building and manufacturing equipment...................................400
Miscellaneous manufacturing overhead* incurred by various departments............550
(ordinarily would be detailed as repairs, photocopying, utilities, etc.)
Manufacturing overhead allocated at 160% of direct manufacturing labour costs.......?
Cost of goods manufactured..................................................................4120
Revenues..........................................................................................8000
Cost of goods sold..............................................................................4020
Stock, 31 December 2014:
Materials control.................................................................................100
Work-in-progress control........................................................................60
Finished goods control.........................................................................500
* The term 'manufacturing overhead' is not used uniformly. Other terms that are often encountered in printing companies include 'job overhead' and 'shop overhead'.
Required
1. Present an overview diagram of the job-costing system at the Editions Sorbonne.
2. Prepare general journal entries to summarize 2015 transactions. As your final entry, dispose of the year-end over- or under-allocated manufacturing overhead as a direct write-off to Cost of Goods Sold. Number your entries. Explanations for each entry may be omitted.
3. Show posted T-accounts for all stocks, Cost of Goods Sold, Manufacturing Overhead Control and Manufacturing Overhead Allocated.
For more details concerning these data, see Exercise 3.19.