# For the year ended December 31, 2020, the job cost sheets of Cinta Company contained the...

## Question:

For the year ended December 31, 2020, the job cost sheets of Cinta Company contained the following data.

Job Number Explanation Direct Materials Direct Labor Manufacturing Overhead Total Costs
7640 Balance 1/1 $25,000$24,000 $28,800$77,800
Current year's costs 30,000 36,000 43,200 109,200
7641 Balance 1/1 11,000 18,000 21,600 $50,600 Current year's costs 43,000 48,000 57,600 148,600 7642 Current year's costs 58,000 55,000 66,000 179,200 Other data: 1. Raw materials inventory totaled$15,000 on January 1. During the year, $140,000 of raw materials were purchased on account. 2. Finished goods on January 1 consisted of Job No. 7638 for$87,000 and Job No. 7639 for $92,000. 3. Job No. 7640 and Job No. 7641 were completed during the year. 4. Job Nos. 7638, 7639, and 7641 were sold on account for$530,000.

5. Manufacturing overhead incurred on account totaled $120,000. 6. Other manufacturing overhead consisted of indirect materials$14,000, indirect labor $18,000, and depreciation on factory machinery$8,000.

a) Prove the agreement of the work-in-process Inventory with job cost sheets pertaining to unfinished work. Post each to the T-account in the following order: (1) beginning balance, (2) direct materials, (3) direct labor, (4) manufacturing overhead, and (5) completed jobs.

b) Prepare the adjusting entry for manufacturing overhead, assuming the balance is allocated entirely to Cost of Goods Sold.

c) Determine the gross profit to be reported for 2020.

## Process, Actual and Normal Costing:

Process costing is used when companies offer a more standardized product. No matter who the customer is, they all end up receiving the same product. Actual costing, a form of job order costing, like the name implies, traces direct and indirect costs to a cost object by using the actual costs incurred on the job. Due to the practical difficulties of using actual costing, many companies instead utilize a normal costing system to obtain a close approximation of the costs on a timelier basis, especially manufacturing overhead costs. Direct materials and direct labor are much more feasible in terms of access to actual costs from material requisition forms and labor timesheets, while manufacturing overhead costs pose difficulties when determining actual costs.

a) The total beginning balance of the work-in-process inventory is as follows:

Job No. Amount ($) 7640 77,800 7641 50,600 Beginning balance 128,400 The total direct material cost of the work-in-process inventory is as follows: Job No. Amount ($)
7640 30,000
7641 43,000
7642 58,000
Total material cost 131,000

The total labor material cost of the work-in-process inventory is as follows:

Job No. Amount ($) 7640 36,000 7641 48,000 7642 55,000 Total material cost 139,000 The total manufacturing overhead cost of the work-in-process inventory is as follows: Job No. Amount ($)
7640 43,200
7641 57,600
7642 66,000
Total material cost 166,800

The cost of the completed job is shown below:

Job No. Amount ($) 1-Jan Beginning Balance 128,400 Completed Work 386,200 Direct Material 131,000 Direct Labor 139,000 Manufacturing overhead 166,800 565,200 Total 386,200 31-Dec Balance (565,200 - 386,200) 179,000 b) The overapplied/underapplied overhead is shown below:  Particulars Amount ($) Manufacturing overhead on account 120,000 Indirect material cost 14,000 Indirect labor cost 18,000 Depreciation 8,000 Total manufacturing overhead (actual) 160,000 Manufacturing overhead applied 166,800 Overapplied overhead (166,800 - 160,000) 6,800

c) The gross profit is shown below:

 Particulars Amount (\$) Sales Revenue 530,000 Less: cost of jobs Indirect labor cost 18,000 7638 87,000 7639 92,000 7641 (50,600 + 148,600 - 6,800) 192,400 371,400 Gross profit 158,600