Determinación de la capacidad de servicio de la oficina de consultoría

a. Raw materials were purchased on account for $67,000.

   When materials are purchased you need to record an increase in raw materials inventory, so you would debit raw materials inventory (an asset) for the cost of the materials, $67,000.

Since the materials were purchased on account, you also need to record a liability to your suppliers, so you would credit Accounts Payable (a liability) for $67,000.

67,000 67,000

Raw Materials Inventory Accounts Payable

b. Materials costing $45,000 were requisitioned for production. Of this total, $40,000 was traced to individual jobs, while $5,000 was requisitioned for general factory use.

When materials are requisitioned, it means that they are moved from raw materials inventory into production.

The direct materials traced to specific jobs are posted to individual job cost records. Since the job cost records form the supporting detail for the work in process inven- tory account, the cost of these direct materials is debited directly to work in process inventory, increasing the asset by $40,000.

The materials that cannot be traced to a specific job (indirect materials) would be debited to manufacturing overhead (an increase of $5,000).

Because we are taking the materials out of the raw materials inventory, we reduce this asset with a credit for the total amount of the materials requisitioned ($45,000).

45,000 40,000

5,000 Work in Process Inventory

Manufacturing Overhead Raw Materials Inventory

c. $32,000 of labour was incurred in the factory. Of the total labour costs, $30,000 was traced to specific jobs worked on during the month. The remainder of the factory labour cost related to indirect labour.

The amount of direct labour traced to individual jobs is posted to individual job cost records. Once again, since the job cost records form the supporting detail for the work in process inventory account; the cost of direct labour is debited to work in process inventory. The rest of the labour, $2,000, is for indirect labour, such as factory supervisors, forklift operators, and janitors. Indirect labour cannot be traced to spe- cific jobs; therefore, it is debited to manufacturing overhead.

We credit wages payable to show a liability to our factory employees until they are paid on the company’s payday.

32,000 30,000

2,000 Work in Process Inventory

Manufacturing Overhead Wages Payable

d. Manufacturing overhead is allocated to production using the predetermined over- head rate of 75% of direct labour cost.

   Manufacturing overhead consists of all of the indirect costs of running the manufac- turing plant, such as depreciation on the plant and equipment, salaries of the janitors, utilities, and property taxes and insurance on the plant. It is impossible to trace these costs to each job; therefore, manufacturers allocate some of these costs to each job using a predetermined overhead rate. Since Douglas Art’s predetermined manufac- turing overhead rate is 75% of direct labour cost, the total amount of manufacturing overhead allocated to production for the month is as follows:

Keep in mind that each individual job cost record would show the amount of manufacturing overhead allocated to that particular job (75% of the direct labour cost traced to the job). Here, we just computed the total amount of manufacturing overhead allocated to all jobs worked on during the month.

All actual manufacturing overhead costs are recorded as debits to the manufactur- ing overhead account. To take cost out of the account and assign it to specific jobs in  production, we credit the manufacturing overhead account:

Manufacturing Overhead

(Actual Costs) (Allocated to Jobs)

   To record the amount of manufacturing overhead allocated to jobs, we debit the work in process inventory. We then take this cost out of the manufacturing overhead account through a credit, as shown in the previous T-account.

22,500 22,500

Work in Process Inventory Manufacturing Overhead

e. Jobs costing $67,000 were completed during the month.

   When jobs are completed, the direct materials, direct labour, and manufacturing overhead costs shown on the job cost records are added together to determine the total cost of the jobs. Then the jobs are moved off the plant floor and into the finished goods storage area until they are shipped to customers. In the accounting records, we also show the movement of these completed jobs by transferring the cost of the jobs from one inventory account to the next. Since all inventory accounts are assets, we debit the accounts to increase them and credit the accounts to decrease them. Thus, the following entry shows an increase in the finished goods inventory and a decrease in the work in process inventory:

67,000 67,000

Finished Goods Inventory Work in Process Inventory

f. douglas sold several jobs during the month for a total price of $106,000. These jobs cost $65,000 to produce. Assume all sales are made on account. Also assume that douglas uses a perpetual inventory system.

   We need to make two journal entries here. The first journal entry records the sale of the art to customers at a sales price of $106,000. Therefore, the following entry records an increase in the accounts receivable and an increase in sales revenue for the year:

106,000 106,000

Accounts Receivable Sales Revenue

   The second entry is made assuming that Douglas has a perpetual inventory system. In a perpetual inventory system, companies show the costs of goods sold at the time they make a sale. They also show that the inventory sold is no longer theirs—it has been sold to the customer. So they make the following journal entry to increase the cost of goods sold (through a debit) and decrease the amount of inventory they have on hand (through a credit):

65,000 65,000

Cost of Goods Sold