Waterways Continuing Problem WCP2 and WCP3

Waterways Continuing Problem

(This is a continuation of the Waterways Problem from Chapter 1)

WCP2 Waterways has two major public-park projects to provide with comprehensive

irrigation in one of its service locations this month. Job J57 and Job K52 involve 15 acres

of landscaped terrain which will require special-order sprinkler heads to meet the specifications

of the project. Using a job cost system to produce these parts, the following

events occurred during December 2012.

Raw materials were requisitioned from the company’s inventory on December 2 for

$5,061; on December 8 for $1,059; and on December 14 for $3,459. In each instance, twothirds

(2/3) of these materials were for J57 and the rest for K52.

Six time tickets were turned in for these two projects for a total amount of 18 hours

of work. All the workers were paid $16.50 per hour. The time tickets were dated December 3,

December 9, and December 15. On each of those days, 6 labor hours were spent on these

jobs, two-thirds (2/3) for J57 and the rest for K52.

The predetermined overhead rate is based on machine hours. The expected machine

hour use for the year is 2,112 hours, and the anticipated overhead costs are $840,576

for the year. The machine were used by workers on projects K52 and J57 on December 3, 9,

and 15. Six machine hours were used for project K52 (2 each day), and 8.5 machine hours

were used for project J57 (2.5 the first day and 3 each of the other days). Both of these

special orders were completed on December 15, producing 237 sprinkler heads for J57

and 142 sprinkler heads for K52.

Additional job order activities during this period of time included:

Dec. 1 Purchased raw materials from Durbin Supply Company on account for $53,200.

Dec. 2 Issued $40,000 of direct materials from the company’s inventory to jobs other

than K52 and J57 and $3,000 of indirect materials.

Dec. 12 Paid Waterways’ factory salaries and wages in the amount of $65,000.

Dec. 13 Paid the factory’s water bill of $9,000.

Dec. 18 Transferred $50,000 of costs from other completed jobs to finished goods.

Dec. 21 Paid the factory’s electric bill of $12,000 for Waterways’ factory.

Dec. 31 Made adjusting entries for the factory that included accrued property taxes of

$12,000, prepaid insurance of $8,800, and accumulated depreciation of $16,000.

Instructions

(a) Set up the job cost sheets for Job No. J57 and Job No. K52. Determine the total cost

for each manufacturing special order for these jobs. (Round unit cost to nearest cent.)

(b) Journalize the activities from these job cost sheets in the general journal. Also journalize

the other costs that occurred during this period of time.

(c) Assuming that Manufacturing Overhead has a debit balance of $3,600, determine

whether overhead has been under/over applied and make the adjusting entry.

(d) Why would Waterways choose machine hours as the cost driver for the overhead

rather than direct labor cost? What would Waterways be likely to choose as the cost

driver for the overhead for the job of installing the irrigation system and why?

(This is a continuation of the Waterways Problem from Chapters 1 and 2. The asterisk*

indicates material discussed in the chapter appendix.)

WCP3 Because most of the parts for its irrigation systems are standard, Waterways handles

the majority of its manufacturing as a process cost system. There are multiple process

departments. Three of these departments are the Molding, Cutting, and Welding departments.

All items eventually end up in the Package department which prepares items for

sale in kits or individually.

The following information is available for the Molding department for January.

Work in process beginning:

Units in process 22,000

Stage of completion for materials 80%

Stage of completion for labor and overhead 30%

Costs in work in process inventory:

Materials $168,360

Labor 67,564

Overhead 17,270

Total costs in beginning work in process $253,194

Units started into production in January 60,000

Units completed and transferred in January 58,000

Costs added to production:

Materials $264,940

Labor 289,468

Overhead 60,578

Total costs added into production in January $614,986

Work in process ending:

Units in process 24,000

Stage of completion for materials 50%

Stage of completion for labor and overhead 10%

Instructions

(a) Prepare a production cost report for Waterways using the weighted-average method.

*(b) Show the equivalent units for materials and conversion costs if Waterways used FIFO

instead of weighted-average