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BA225 Week 2 Chapter 2

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BE2-1 Knox Company begins operations on January 1. Because all work is done to customer
specifications, the company decides to use a job order cost system. Prepare a flowchart
of a typical job order system with arrows showing the fl ow of costs. Identify the eight
transactions.

BE2-2 During January, its first month of operations, Knox Company accumulated the following
manufacturing costs: raw materials $4,000 on account, factory labor $6,000 of which
$5,200 relates to factory wages payable and $800 relates to payroll taxes payable, and utilities
payable $2,000. Prepare separate journal entries for each type of manufacturing cost.

BE2-3 In January, Knox Company requisitions raw materials for production as follows:
Job 1 $900, Job 2 $1,400, Job 3 $700, and general factory use $600. Prepare a summary
journal entry to record raw materials used.

E2-1 The gross earnings of the factory workers for Vargas Company during the month of
January are $66,000. The employer’s payroll taxes for the factory payroll are $8,000. The
fringe benefits to be paid by the employer on this payroll are $6,000. Of the total accumulated
cost of factory labor, 85% is related to direct labor and 15% is attributable to indirect labor.

Instructions
(a) Prepare the entry to record the factory labor costs for the month of January.
(b) Prepare the entry to assign factory labor to production.

E2-2 Stine Company uses a job order cost system. On May 1, the company has a balance in
Work in Process Inventory of $3,500 and two jobs in process: Job No. 429 $2,000, and Job
No. 430 $1,500. During May, a summary of source documents reveals the following.

Materials Labor
Job Number Requisition Slips Time Tickets
429  2,500  1,900
430  3,500  3,000
431  4,400  10,400  7,600  12,500
General use  800  1,200
 11,200  13,700

Stine Company applies manufacturing overhead to jobs at an overhead rate of 60% of
direct labor cost. Job No. 429 is completed during the month.

Instructions
(a) Prepare summary journal entries to record (i) the requisition slips, (ii) the time tickets,
(iii) the assignment of manufacturing overhead to jobs, and (iv) the completion of Job
No. 429.
(b) Post the entries to Work in Process Inventory, and prove the agreement of the control
account with the job cost sheets. (Use a T-account.)

BE2-1 BE2-2 BE2-3 E2-1 E2-2

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