Job Costing Problem: Lit*Up, Incorporated
Lit*Up, Inc., manufactures custom-made wrought-iron lighting fixtures for museum, gallery, and corporate settings. The Company uses a normal job costing system. The Company has two indirect cost pools: indirect costs for iron-working (base is machine hours used) and indirect costs for finishing (base is direct labor cost).
For the current year, the Company has budgeted $568,425.00 for indirect iron-working costs and $411,250.00 for indirect finishing costs. They also have budgeted direct labor costs to be 70,000 direct labor hours @ $23.50 per hour; plus 97,500 machine hours.
Lit*Up worked on five jobs during the current period. Jobs L-251 and L-343 were carried forward from the prior period, with beginning balances of $23,000.00 and $15,250.00 respectively. Jobs L-453, L-520, and L-575 were begun in the current period. Information for the current period appears below:
Direct materials issued in the current period to Jobs L-251, L-343, L-453, L-520, and L-575 were $5,452.00; $5,327.00; $6,998.00; $6,750.00; and $5,522.00 respectively. The jobs used 103; 112; 325; 330; and 264 direct labor hours respectively; the wage rate is $24.00 per hour for all production employees currently. The jobs used 200; 253; 492; 437; and 386 machine hours respectively.
For the current period, actual indirect iron-working costs were $15,199.10; actual indirect finishing costs were $3,027.56.
Jobs L-251 and L-343 were completed and sold during the current period; Job L-453 was completed but not sold; Jobs L-520 and L-575 are incomplete at the end of the current period.
REQUIREMENTS (use good format!):
1.Calculate the MOH allocation rates for both indirect cost pools.
2.Prepare a detailed schedule to show the ending balances in Work-In-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold.
3.For each indirect cost pool, determine whether Lit*Up is under- or over-allocated.
4.Calculate the under- or over-allocation adjustments using proration based on the amount of iron-working and finishing MOH included in account balances.
5.Prepare the journal entries necessary at year-end to adjust the allocations and to close the MOH accounts.