SRS Educational Supply Company provides educational materials and supplies to educational institutions. The company provides educational supply needs that includes workbooks, classroom visual aids, instructor support materials, art supplies, lab supplies, and administrative office supplies. Since SRS Educational Supply Company consistently produces the same service to its customers, the company uses job order costing. The company's processing units are assigned costs. For example, the company will determine all of the costs associated with the sales/marketing in a certain period and divide the costs by the number of customers that the company currently has. The cost per customer then becomes a part of the inputs and its used to determine the cost of sales/marketing and the cost of each customer. Service industries often do not match directly the normal costing systems, but the same concepts can still be used to determine the costs per customer. The SRS Educational Press is wholly owned by the Company. It performs the bulk of its work for the print materials that are sold to the customers. The press also publishes and maintains a stock of books for general sale. The press uses normal costing to cost each job. Its job-costing system has two direct-cost categories (direct materials and direct manufacturing labor) and one indirect-cost pool (manufacturing overhead, allocated on the basis of direct manufacturing labor costs).
The following data (in thousands) pertain to 2017:
a. Direct materials and supplies purchased on credit: $800
b. Direct materials used: $710
c. Indirect materials issued to various production departments: $100
d. Direct manufacturing labor: $1,300
e. Indirect manufacturing labor incurred by various production departments: $ 900
f. Depreciation on building and manufacturing equipment: $ 400
g. Miscellaneous manufacturing overhead incurred by various production departments: $ 550
(Ordinarily, this would be detailed as repairs, photocopying, utilities, etc.)
h. Manufacturing overhead allocated at 160% of direct manufacturing labor costs: ?
i. Cost of goods manufactured: $ 4,120
j. Revenues: $ 8,000
k. Cost of goods sold (before adjustment for under-or overallocated manufacturing overhead): $ 4,020
l. Inventories, December 31, 2016 (not 2017):
Materials control: $ 100
Work-in-process control: $ 60
Finished goods control: $ 500
As the accountant, the company has asked you to perform the following tasks:
1. Prepare an overview diagram of the job-costing system at the SRS Educational Press.
2. Prepare journal entries to summarize the 2017 transactions. As your final entry, dispose of the year-end under- or overallocated manufacturing overhead as a write-off to cost of goods sold. Number your entries. Explanations for each entry may be omitted.
3. Show posted T-accounts for all inventories, Cost of Goods Sold, Manufacturing Overhead Control, and Manufacturing Overhead Allocated.
4. How did the SRS Educational Press perform in 2017? Should the company continue to have in-house press production?