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Practice Problem 2

The following information is available for the molding department and packing department for Fabio’s Chocolates:

Beginning work in process inventory, molding department, $12,500

Beginning work in process inventory, packing department, $27,200

Fabio’s had the following transaction related to the molding department:

1. At the end of August, the production cost report for the mixing department was prepared. Fabio’s assigned $175,780 to 22,000 units transferred to the molding department.

2. During the month, $5,000 in direct materials were assigned to the molding department. There were no indirect materials added to the process in the molding department.

3. During the month, Fabio’s incurred $62,000 in direct labor costs and $12,500 in indirect labor costs in the molding department.

4. Fabio’s incurred the following factory overhead costs in addition to direct labor: depreciation of equipment, $32,000; utilities, $17,500; and other factory overhead costs, $10,000. The company has received a bill for these costs.

5. The company allocates factory overhead to the molding department based on 120% of direct labor costs.

6. At the end of month, the production cost report for the molding department was prepared. Fabio’s assigned $318,750 to 23,500 units transferred to the packing department.

7. Fabio’s prepared the adjusting entry for overallocated or underallocated factory overhead for the molding department.

Required:

1. Journalize all of the transactions related to the molding department during September.

2. Prepare the ledger accounts for:

         a. Work in process, molding department

         b. Work in process inventory, packing department

c. factory overhead (post only the transactions related to the molding department).