Managerial Accounting: P19-1A Lemmon Co.'s March 31 inventory of raw materials

Managerial Accounting 
Problem 19-1A 
Lemmon Co.'s March 31 inventory of raw materials is $170,000. Raw materials purchases in April are $310,000, and factory payroll cost in April is $224,000. Overhead costs incurred in April are: indirect materials, $25,000; indirect labor, $19,000; factory rent, $25,000; factory utilities, $13,000; and factory equipment depreciation, $41,000. The predetermined overhead rate is 65% of direct labor cost. Job 306 is sold for $400,000 cash in April. Costs of the three jobs worked in April follow. 
Job 306 Job 307 Job 308 
Balances on March 31 
Direct materials 9,000 17,000 
Direct labor 19,000 5,000 
Applied overhead 12,350 3,250 
Costs during April 
Direct materials 75,000 160,000 65,000 
Direct labor 31,000 74,000 100,000 
Applied overhead 
Status on April 30 Finished (sold) Finished (unsold) In process 

Required 
1. Determine the total of each production cost incurred for April (direct labor, direct materials, and applied overhead), and the total cost assigned to each job (including the balances from March 31). 
2. Prepare journal entries for the month of April to record the following: 
a. Materials purchases (on credit), factory payroll (paid in cash), and actual overhead costs including indirect materials and indirect labor. (Factory rent and utilities are paid in cash.) 
b. Assignment of direct materials, direct labor, and applied overhead costs to the Goods in Process Inventory. 
c. Transfer of jobs 306 and 307 to the Finished Goods Inventory. 
d. Cost of goods sold for job 306. 
e. Revenue from the sale of job 306 
f. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.) 
3. Prepare a manufacturing statement for April (use a single line presentation for direct materials and show the details of overhead cost). 
4. Compute gross profit for April. Show how to present the inventories on the April 30 balance sheet. 
Analysis Component 
5. The over- or underapplied overhead is closed to Cost of Goods Sold. Discuss how this adjustment impacts business decision making regarding individual jobs or batches of jobs. 
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