Dillon Products manufactures various machined parts to customerspecifications. The company uses a job-order costing system andapplies overhead cost to jobs on the basis of machine-hours. At thebeginning of the year, the company used a cost formula to estimatethat it would incur $4,192,500 in manufacturing overhead cost at anactivity level of 559,000 machine-hours. The company spent theentire month of January working on a large order for 12,800custom-made machined parts. The company had no work in process atthe beginning of January. Cost data relating to January follow: Rawmaterials purchased on account, $319,000. Raw materials used inproduction, $252,000 (80% direct materials and 20% indirectmaterials). Labor cost accrued in the factory, $156,000 (one-thirddirect labor and two-thirds indirect labor). Depreciation recordedon factory equipment, $62,800. Other manufacturing overhead costsincurred on account, $84,800. Manufacturing overhead cost wasapplied to production on the basis of 40,720 machine-hours actuallyworked during the month. The completed job for 12,800 custom-mademachined parts was moved into the finished goods warehouse onJanuary 31 to await delivery to the customer. (In computing thedollar amount for this entry, remember that the cost of a completedjob consists of direct materials, direct labor, and appliedoverhead.) Required: 1. Prepare journal entries to record items (a)through (f) above [ignore item (g) for the moment]. 2. PrepareT-accounts for Manufacturing Overhead and Work in Process. Post therelevant items from your journal entries to these T-accounts. 3.Prepare a journal entry for item (g) above. 4. If 10,300 of thecustom-made machined parts are shipped to the customer in February,how much of this job’s cost will be included in cost of goods soldfor February?
