Tony Allan Inc is a small manufacturer of metal products in Toronto.  The company rents its factory building.  It uses a job order costing system because it has a wide variety of products that receive varying attention and effort in the two factory departments, Machining and Assembly.  Tony Allen Company uses a perpetual inventory system.   Tony Allen Company had the following post-closing trial balance as of December 31, 2011:

Goods in process:

Finished goods:

Raw materials:

 Labour costs and overhead costs:

 The hourly rate including benefits for machinists is $_____(D) and for assemblers is $______(E).

To cost jobs as they are worked on, a predetermined or budgeted overhead rate was computed for 2009 based on the following budgeted cost drivers:

            Machining department                       69,450 machine hours

            Assembly department                         $206,400 of direct labour

These overhead rates will be used throughout the year by each department.  (Note that applying factory overhead on the basis of machine hours is not something you have done before in this course.) All overhead will be applied to all jobs worked on during the year in proportion to the machine-hour and/or direct-labour cost devoted to each job.

This budget was prepared after careful consideration of the sales outlook for the coming year.  The forecasted budget consisted of the following items:

For The Year Ended December 31, 2011

TRANSACTIONS:

The following transactions occurred during the month of January 2012:

1.  Purchases of raw materials (on account):

2. Assume that costs have not changed in the last year.

3. Returns on account:  50 units of material B.  (receiving report #1019)

4. The direct material requisitions were summarized, and the following data were shown on a material usage report.

Machining Department  Direct Material Usage

For the Month Ended January 31, 2012

Assembly Department Direct Material Usage

For the Month Ended January 31, 2012

5. A summary of payroll costs incurred as per the time tickets is as follows:

Actual Labour Hours Worked  For the Month Ended January 31, 2012

Other payroll costs:

(Only factory wages should be run through the factory payroll account, whereas the rest should go directly to Selling and Admin.)

6. Apply overhead to jobs.  See data for item 6 to obtain machine hours worked.  (A direct labourer operates more than one machine simultaneously, so machine hours are not necessarily equal to labour hours incurred by machinists.)

7. Use the following information to (a) record the completion and  (b) the saleof the items:

Tony Allen Inc Production and Sales Data

For the Month Ended January 31, 2012

All sales are on account.

8. Gross payroll (factory and office) of $44,000 is paid in cash.

9. The following additional overhead costs were incurred during January:

10. Utility bills received $2,900 (DR Accrued utilities and CR A/P).

11. Utility bills paid, $2,525.

12. Other selling and administrative expenses incurred, $15,000.

13. Other payments on account, $63,500.

14.  Collections on account, $99,000.

15. Close under- or over-applied Factory Overhead to Cost of Goods Sold.

REQUIRED:

1. Enter all starting balances in the GL and sub ledgers. You will need to calculate your raw materials inventory value (about $30,000) based on your assigned variables. Adjust retained earnings to balance the opening trial balance. Round all totals to the nearest dollar and all per unit numbers to two decimal places.
2. Journalize the above summary transactions, all dated January 31, 2012.(No new balance sheet accounts are required.You should need to add only the following temporary accounts: Revenue, Cost of Goods Sold, Selling & Administrative Expense, Factory Overhead, Factory Payroll.)
3. Post to the general ledger and sub ledgers for January 2010, using proper posting references. (It is recommended that you post as you go, especially for accounts that have sub ledgers.)
4. Prepare a trial balance as of January 31, 2012.
5. Prepare schedules that reconcile the raw materials, goods in process and finished goods sub ledgers with the general ledger accounts as of January 31, 2012.
6.  Prepare a manufacturing statement for January 2012.
7. Prepare an income statement and statement of retained earnings for January 2012.
8. Prepare a (classified) balance sheet as of January 31, 2012.
9. Prepare and post a closing entry (or entries) for the month end.
10. Order your submission as follows:

• §  Cover sheet with group members and your variables.
• §  Journal entries
• §  General ledger
• §  Sub ledgers
• §  Trial balance
• §  Account reconciliations