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Job Costing: Dutch Fabricators, Wharfedale, Winter Lips

Dutch Fabricators: Journal Entries
The following transactions were incurred by Dutch Fabricators during January, the first month of the fiscal year.
Requirements;
1. Record the proper journal entry for each transaction.
a.$190,000 of material were purchased on account
b.$174,000 of material were used in production, of this amount $152,000 was used on specific jobs
c. Manufacturing labor and salaries for the month totaled $225,000: A total of $190,000 of manufacturing labor and salaries was traced to specific jobs while the remainder was indirect labor used in the factory.
d. The company recorded $20,000 of depreciation on the plant and plant equipment. The company also received a plant utility bill for $10,000
e. $81,000 of manufacturing overhead was allocated to specific jobs.
2. By the end of January was manufacturing overhead overallocated or underallocated? By how much?

Wharfedale: Quality Initiative Decision
Wharfedale manufacturer high quality speakers. Suppose Wharfedale is considering spending the following amounts on a new quality program

Additional 20 minutes of testing for each speaker?????????$600,000
Negotiating with and training suppliers to obtain higher quality materials and on time delivers?????????????????????????...$300,000
Redesigning the speakers to make them easier to manufacturer????$1,400,000

Wharfedale expects this quality program to save costs as follows.

Reduce warranty repair cost??????????????????$200,000
Avoid inspection of raw materials???????????????...$400,000
Rework avoided because of fewer defective units?????????...$650,000
Lost sales due to disappointed customers?????????????$850,000
Lost production time due to work????????????????$300,000

a. Classify each of these costs into one of the four categories of quality costs (prevention, appraisals, internal failure, external failure).
b. Should Wharfedale implement the quality program? Give your reasons.

Winter Lips: Process costing in a single processing department
Winter Lips produces a lip balm used for cold weather sports. The balm is manufactured in a single processing dept. No lip balm was in process on May 31 and Winter Lips started production on 20,400 lip balm tubes during June. Direct materials are added at the beginning of the process but conversion costs are incurred evenly throughout the process. Completed production for June totaled 15,200 units. The June 30 work in process was 40% of the way through the production process. Direct materials costing $4,080 were placed in production during june and direct labor of $3,315 and manufacturing overhead of $1,005 were assigned to the process.

Assign total cost to 1) units completed and transferred to finish goods and 2) units still in process at June 30.

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Dutch Fabricators: Recording journal entries
The following transactions were incurred by Dutch Fabricators during January, the first month of the fiscal year.
Requirements;
1. Record the proper journal entry for each transaction.
a.$190,000 of material were purchased on account
b.$174,000 of material were used in production, of this amount $152,000 was used on specific jobs
c. Manufacturing labor and salaries for the month totaled $225,000: A total of $190,000 of manufacturing labor and salaries was traced to specific jobs while the remainder was indirect labor used in the factory.
d. The company recorded $20,000 of depreciation on the plant and plant equipment. The company also received a plant utility bill for $10,000
e. $81,000 of manufacturing overhead was allocated to specific jobs.
2. By the end of January was manufacturing overhead overallocated or underallocated? By how much?

Journal
DATE ACCOUNTS AND EXPLANATIONS POST.
REF. DEBIT CREDIT
a. Raw Materials Inventory 190,000
Accounts Payable 190,000

b. Work in Process Inventory 152,000
Manufacturing Overhead 22,000
Raw Materials Inventory 174,000

c. Work in Process Inventory 190,000
Manufacturing Overhead 35,000
Wages Payable 225,000

d. Manufacturing Overhead 30,000
Acc Depreciation 20,000
Accounts Payable 10,000

e. Work in Process Inventory 81,000
Manufacturing ...

Solution Summary

The transactions incurred by Dutch Fabrications during January is determined.

$2.19