Question:

Artarmon Ltd uses a job-order costing system and a predetermined overhead rate based on direct labour cost. Estimated manufacturing overheads for the coming year were $600,000, and estimated direct labour hours were 40,000. On 1 January, the company had the following inventories:

The following information relates to the company's activities for the month of January:

1. Purchased $180,000 of materials on account.

2. Jobs 126 and 127 were started during the month.

3. Materials requisitioned for production totaled $90,000, of which $5,000 was for indirect materials. The remainder was distributed as follows:

4. Factory payroll for the month totaled $140,000, of which $23,000 was for indirect labour. The company uses a labour rate of $13 per direct labour hour. The direct labour was distributed as follows:

5. The company made adjusting entries at the end of January to record the following expenses:

6. Other manufacturing costs not yet paid totaled $50,000.

7. Manufacturing overheads were applied using the predetermined overhead rate based upon direct labour hours.

8. Jobs 125 and 126 were completed during the month.

9. Job No. 125 was sold during the month at a selling price of 170% of manufacturing cost.

(A) Prepare journal entries to record the manufacturing activities of the company for January. Identify each journal entry with the number corresponding to the parts of the question, 1, 2, 3, etc.

(B) Provide a job cost summary sheet for January.

(C) Provide the Overhead Control Account for January.

(D) Provide the Work in Process Account for January.

(E) Prepare the journal entry to dispose of the underapplied or overapplied overheads if the underapplied or overapplied overheads are treated as an adjustment to cost of goods sold.