Chapter 7, Problem 58P

Tracing Costs in a Job Company

The following transactions occurred in January at Apex Manufacturing, a custom parts supplier. Apex uses job costing:

1. 1. Purchased $75,180 in materials on account.
2. 2. Issued $2,100 in supplies from the materials inventory to the production department.
3. 3. Paid for the materials purchased in transaction (1).
4. 4. Issued $35,700 in direct materials to the production department.
5. 5. Incurred wage costs of $58,800, which were debited to Payroll, a temporary account. Of this amount, $18,900 was withheld for payroll taxes and credited to Payroll Taxes Payable. The remaining $39,900 was paid in cash to the employees. See transactions (6) and (7) for additional information about Payroll.
6. 6. Recognized $29,400 in fringe benefit costs, incurred as a result of the wages paid in (5). This $29,400 was debited to Payroll and credited to Fringe Benefits Payable.
7. 7. Analyzed the Payroll account and determined that 60 percent represented direct labor; 30 percent, indirect manufacturing labor; and 10 percent, administrative and marketing costs.
8. 8. Paid for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing plant totaling $45,360.
9. 9. Applied overhead on the basis of 175 percent of direct labor costs.
10. 10. Recognized depreciation of $24,150 on manufacturing property, plant, and equipment.

Required

1. a.      Prepare journal entries to record these transactions.
2. b.      The balances that appeared in the accounts of Apex Manufacturing are shown next.

Prepare T-accounts to show the flow of costs during the period.