Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 5

Assigning Costs to Jobs

Partially completed T-accounts and additional information for Pine Ridge Corporation for the month of February follow.

Additional information for February follows:

• Labor wage rate was $25 per hour.

• During the month, sales revenue was $600,000, and selling and administrative costs were $105,000.

• This company has no indirect materials or supplies.

• The company applies manufacturing overhead on the basis of direct labor costs.

Required

a. What was the cost of direct materials issued to production during February?

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b. What was the over- or underapplied manufacturing overhead for February?

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c. What was the manufacturing overhead application rate in February?

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d. What was the cost of products completed during February?

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e. What was the balance of the Work-in-Process Inventory account at the end of February?

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f. What was the operating profit for February? Any over- or underapplied overhead is written off to Cost of Goods Sold.

Step 1 of 11

Ledger (T-Accounts):

It is an account which is used to post the transactions which were previously recorded using the journal entries. The shape of the account reflects T so called T account. The left hand side of the account is posted with all the debit transactions and the right hand side is posted with all the credit transactions. The T accounts are used in both cost and financial accounting. In cost accounting, the transactions relating to recording costs of manufacturing of finished goods are posted in T accounts. In financial accounting, T accounts are used to record the financial transactions for the accounting period.