Raw materials purchased on account, $102,000. Direct materials used in production, $42,500. Indirect materials used in production, $15,000. Paid cash for factory payroll, $55,000. Of this total, $37,000 is for direct labor and $18,000 is for indirect labor. Paid cash for other actual overhead costs, $8,375. Applied overhead at the rate of 125% of direct labor cost. Transferred cost of jobs completed to finished goods, $72,600. Sold jobs on account for $104,000. The jobs had a cost of $72,600.

Journal Entries are given below in explanation.

Explanation:

Account                                                   Dr                      Cr

1.Raw materials                                     102000

Account payable-Liability                                             102000

The Materials are purchased in credit.

2. Work In Process                               42500

Direct materials / Raw materials                                   42500

Entry for Materials used in Production.

3. Factory Overhead                             15000

Raw materials                                                                 15000

Entry for indirect materials used in production

4. Factory payroll- Salaries                    55000

Cash / Bank                                                                      55000

Salaries to employees are paid through cash.

5. Direct Labor / Work in Process            37000

Factory Overhead / Indirect labor            18000

Factory Payroll                                                                  55000

6. Overhead                                                8375

Cash / bank                                                                         8375

7. Work in process                                      46250

Applied Overhead                                                              46250

Applied overhead is charged as 125 % of direct labor cost.

8. Finished Goods                                      72600

Work In Process                                                                   72600

Transfer of inventory from Work in process to Finished Goods

9. Accounts Receivable                               104000

Sales Revenue                                                                     104000

Cost of goods sold                                       72600

Finished Goods                                                                    72600

Entry for selling finished job on account.        

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