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    Vermont Clock Works Job-Order Costing

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    Vermont Clock Works manufactures fine, handcrafted clocks. The firm uses a job-order costing system, and manufacturing overhead is applied on the basis of direct-labor hours. Estimated manufacturing overhead for the year is $260,000. The firm employs 10 master clockmakers, who constitute the direct labor force. Each of these employees is expected to work 2,000 hours during the year. The following events occurred during October.

    a. The firm purchased 2,900 board feet of mahogany veneer at $12 per board foot.
    b. Twenty brass counterweights were requisitioned for production. Each weight cost $27.
    c. Five gallons of glue were requisitioned for production. The glue cost $25 per gallon. Glue is treated as an indirect material.
    d. Depreciation on the clockworks building for October was $7,000.
    e. A $300 utility bill was paid in cash.
    f. Time cards showed the following usage of labor:
    Job number G60: 12 grandfather's clocks, 950 hours of direct labor
    Job number C81: 15 cuckoo clocks, 500 hours of direct labor
    The master clockmakers (direct-labor personnel) earn $22 per hour.
    g. The October property tax bill for $890 was received but not yet paid in cash.
    h. The firm employs laborers who perform various tasks such as material handling and shop cleanup.
    Their wages for October amounted to $3,100.
    i. Job number G60, which was started in July, was finished in October. The total cost of the job was $15,100.
    j. Nine of the grandfather's clocks from job number G60 were sold in October for $1,600 each.


    1. Calculate the firm's predetermined overhead rate for the year.
    2. Prepare journal entries to record the events described above.

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    Solution Summary

    The solution calculates the overhead rate, and prepares entries for the Vermonth Clock Works.