Chapter 15
JOB ORDER COSTING AND ANALYSIS
True/False Questions
1. Cost accounting systems accumulate costs and then assigns them to products or services.
2. A company that uses a cost accounting system normally has only two inventory accounts:
Finished Goods Inventory and Work in Process Inventory.
3. Cost accounting information is helpful to management for pricing decisions but has no
effect on controlling costs.
4. There are two basic types of cost accounting systems: job order costing and periodic
costing.
5. A company that produces a large number of standardized units would normally use a job
order costing system.
6. Job order production systems would be appropriate for companies that produce custom
homes, specialized equipment, and special computer systems.
7. Job order production systems would be appropriate for companies that produce compact
disks or disposable cameras.
8. A job order costing system would be appropriate for a manufacturer of automobile tires.
9. Job order production systems would be appropriate for companies that produce training
films for a specific customer or custom-made furniture to be used in a new five-star resort
hotel.
10. A company’s file of job cost sheets jobs not yet completed equals the balance in the
Finished Goods Inventory account.
11. The direct materials section of a job cost sheet shows the materials costs assigned to a job,
but the direct labor section only shows the total hours of labor allocated to the job.
12. The collection of cost sheets for unfinished jobs makes up a subsidiary ledger controlled
by the Work in Process Inventory account in the general ledger.
13. A job cost sheet is useful for developing financial accounting numbers but does not
contain information that is useful for managing the production process.
14. Job cost sheets are used to track all of the costs assigned to a job, including direct
materials, direct labor, overhead, and all selling and administrative costs.
15. When a job is finished, its job cost sheet is completed and moved from the file of jobs in
process to the file of finished jobs that are yet to be delivered to customers.
16. The file of job cost sheets for completed but undelivered jobs equals the balance in the
Work in Process Inventory account.
17. Both direct and indirect labor costs are recorded on the individual job cost sheets.
18. Service firms, unlike manufacturing firms, should only use actual costs when determining
a selling price for their services.
19. Job order costing is applicable to manufacturing firms only and not service firms.
20. The cost of all direct materials issued to production is debited to Work in Process
Inventory.
21. A materials requisition is a source document used by production managers to request
materials for production and also used to assign materials costs to specific jobs or to
overhead.
22. When materials are used as indirect materials, their cost is debited to the Factory
Overhead account.
23. A materials requisition is a source document used by materials managers of a
manufacturing company to order raw materials from suppliers; it serves the same purpose as a
purchase order in a merchandising company.
24. Materials requisitions and time tickets are cost accounting source documents.
25. A time ticket is a source document used by an employee to record the number of hours
worked on a particular job during the work day.
26. A time ticket is a source document that an employee uses to report how much direct and
indirect labor was performed for a job and is used to determine the amount of direct labor to
charge to the job and the amount of indirect labor to charge to factory overhead.
27. A time ticket is a source document an employee uses to record the number of hours at
work and that is used each pay period to determine the total labor cost.
28. A time ticket is a source document used by an employee to record the total number of
hours worked and serves as a source document for entries to record labor costs.
29. When time ticket information is entered into the accounting system, the journal entry is a
debit to Factory Payroll and a credit to Work in Process Inventory.
30. The predetermined overhead rate is used to allocate overhead cost to jobs.
31. Factory overhead is often collected and summarized in a subsidiary factory overhead
ledger.
32. Predetermined overhead rates are calculated at the end of the accounting period once the
actual amount of factory overhead is known.
33. Predetermined overhead rates are necessary because cost accountants use periodic
inventory systems.
34. The predetermined overhead rate based on direct labor cost is the ratio of estimated
overhead cost to estimated direct labor cost for the period.
35. In a job order costing system, indirect labor costs are debited to the Factory Overhead
account.
36. Since a predetermined overhead rate is established before a period begins, this rate is
revised many times during the period to compensate for inaccurate estimates previously
made.
37. Under a job order costing system, individual jobs are always charged with actual overhead
costs when they are transferred to finished goods.
38. Actual factory overhead incurred in a job costing system is debited to a Factory Overhead
general ledger account and credited to various other accounts.
39. Direct materials and direct labor are examples of costs that are debited to the Factory
Overhead account in a job costing system.
40. Overapplied overhead is the amount by which actual overhead cost exceeds the overhead
applied to products during the period.
41. In a job order costing system, any immaterial underapplied overhead at the end of the
period can be charged entirely to Cost of Goods Sold.
42. If actual overhead incurred during a period exceeds applied overhead, the difference will
be a credit balance in the Factory Overhead account at the end of the period.
43. The Factory Overhead account will have a credit balance at the end of a period if
overhead applied during the period is greater than the overhead incurred.
44. Material amounts of under- or overapplied factory overhead are always closed entirely to
Cost of Goods Sold at the end of an accounting period.
45. Underapplied overhead is the amount by which overhead applied to jobs using the
predetermined overhead rate exceeds the overhead incurred during a period.
46. Overapplied overhead is the amount by which overhead applied to jobs using the
predetermined overhead rate exceeds the overhead incurred during a period.
47. Overapplied or underapplied overhead should be removed from the Factory Overhead
account at the end of each accounting period.
48. If overhead is underapplied, it means that individual jobs have not been charged enough
during the year and the cost of goods sold reported is too low.
49. The schedule of cost of goods manufactured for a job costing system includes total actual
factory overhead.
51. Manufacturing costs incurred for jobs completed during an accounting period can bypass
the inventory accounts on the balance sheet and be recorded directly in expense accounts.
52. Cost accounting systems used by manufacturing companies are based on the:
A. Periodic inventory system.
B. Perpetual inventory system.
C. Finished goods inventories.
D. Weighted average inventories.
E. LIFO inventory system.
53. A system of accounting for production operations that produces timely information about
inventories and manufacturing costs per unit of product is a:
A. Finished goods accounting system.
B. General accounting system.
C. Manufacturing accounting system.
D. Cost accounting system.
E. Production accounting system.
54. Job order costing systems normally use:
A. Periodic inventory systems.
B. Perpetual inventory systems.
C. Real inventory systems.
D. General inventory systems.
E. Any inventory systems is acceptable. .
55. In comparison to a general accounting system, a cost accounting system for a
manufacturing company places an emphasis on:
A. Periodic inventory counts.
B. Total costs.
C. Continually updating costs of materials, work in process, and finished goods inventories.
D. Products and average costs.
E. Large volume operations involving standardized products.
56. Features of a job costing system include all but which of the following:
A. Diversity of products produced.
B. Mass production.
C. Heterogeneity
D. Customization
E. Separate manufacturing from other products
57. The two basic types of cost accounting systems are:
A. Job order costing and perpetual costing.
B. Job order costing and customized product costing.
C. Job order costing and customized service costing.
D. Job order costing and process costing.
E. Job order costing and periodic costing.
58. The production activities for a customized product represent a(n):
A. Operation.
B. Job.
C. Unit.
D. Pool.
E. Process.
59. A job order costing system would best fit the needs of a company that makes:
A. Shoes and apparel.
B. Paint.
C. Cement.
D. Custom machinery.
E. Pencils and erasers.
60. Job order production is also known as:
A. Mass production.
B. Process production.
C. Unit production.
D. Customized production.
E. Standard costing.
61. Omega Contractors manufactures each house to customer specifications. It most likely
would use:
A. Process costing.
B. A periodic inventory system.
C. Unique costing.
D. Job order costing.
E. Activity-based costing.
62. A type of production that yields customized products or services for each customer is
called:
A. Customer orientation production.
B. Job order production.
C. Just-in-time production.
D. Job lot production.
E. Process production.
63. A company that makes which of the following types of products would best be suited for a
job costing system?
A. Fruit juice
B. Bathing suits
C. Snack chips
D. Compact discs
E. Custom jewelry
64. The target cost for a job using job costing is calculated as
A. direct costs + desired profit
B. direct costs – desired profit
C. expected selling price – direct costs
D. expected selling price – desired profit
E. expected selling price + desired profit
65. A job order production system would be appropriate for a company that produces which
one of the following items?
A. A landscaping design for a new hospital.
B. Seedlings for sale in a nursery.
C. Sacks of yard fertilizer.
D. Packets of flower seeds.
E. Small gardening tools, including rakes, shovels, and hoes.
66. Large aircraft producers such as the Boeing Company normally use:
A. Job order costing.
B. Process costing.
C. Mixed costing.
D. Full costing.
E. Simple costing.
67. A document in a job order costing system that is used to record the costs of producing a
job is a(n):
A. Job cost sheet.
B. Job lot.
C. Finished goods summary.
D. Process cost system.
E. Units-of-production sheet.
68. A job cost sheet shows information about each of the following items except:
A. The direct labor costs assigned to the job.
B. The name of the customer.
C. The costs incurred by the marketing department in selling the job.
D. The overhead costs assigned to the job.
E. The direct materials costs assigned to the job.
69. The job order cost sheets used by Greene Company revealed the following:
Job. No. Bal., May 1 May Production Costs
134 $1,700 $ 0
135 1,200 300
136 0 900
Job No. 135 was completed during May and Jobs No. 134 and 135 were shipped to customers
in May. What was the company’s cost of goods sold for May and the Work in Process
inventory on May 31?
A. $3,200; $ 900.
B. $2,900; $1,200.
C. $1,200; $2,900.
D. $1,700; $1,200.
E. $4,100; $ 0.
70. Job A3B was ordered by a customer on September 25. During the month of September,
Jaycee Corporation requisitioned $2,500 of direct materials and used $4,000 of direct labor.
The job was not finished by the end of the month, but needed an additional $3,000 of direct
materials and additional direct labor of $6,500 to finish the job in October. The company
applies overhead at the end of each month at a rate of 200% of the direct labor cost incurred.
What is the balance in the Work in Process account at the end of September relative to Job
A3B?
A. $5,500
B. $11,500
C. $6,500
D. $9,500
E. $14,500
71. Job A3B was ordered by a customer on September 25. During the month of September,
Jaycee Corporation requisitioned $2,500 of direct materials and used $4,000 of direct labor.
The job was not finished by the end of the month, but needed an additional $3,000 of direct
materials and additional direct labor of $6,500 to finish the job in October. The company
applies overhead at the end of each month at a rate of 200% of the direct labor cost incurred.
What is the total cost of the job when it is completed in October?
A. $16,000
B. $22,500
C. $37,000
D. $26,500
E. $32,000
72. Job A3B was ordered by a customer on September 25. During the month of September,
Jaycee Corporation requisitioned $2,500 of direct materials and used $4,000 of direct labor.
The job was not finished by the end of the month, but needed an additional $3,000 of direct
materials in October and additional direct labor of $6,500 to finish the job. The company
applies overhead at the end of each month at a rate of 200% of the direct labor cost. What is
the amount of job costs added to Work in Process Inventory during October?
A. $16,000
B. $22,500
C. $37,000
D. $26,500
E. $32,000
73. A job cost sheet includes:
A. Direct materials, direct labor, operating costs.
B. Direct materials, estimated overhead, administrative costs.
C. Direct labor, actual overhead, selling costs.
D. Direct material, direct labor, estimated overhead.
E. Direct materials, direct labor, selling costs.
74. The balance in the Work In Process Inventory at any point in time is equal to:
A. The costs for jobs finished during the period but not yet sold.
B. The cost of jobs ordered but not yet started into production.
C. The sum of the costs for all jobs in process but not yet completed.
D. The costs of all jobs started during the period, completed or not.
E. The sum of the materials, labor and overhead costs paid during the period.
75. The Work in Process Inventory account of a manufacturing company that uses an
overhead rate based on direct labor cost has a $3,200 debit balance after all posting is
completed. The cost sheet of the one job still in process shows direct material cost of $1,400
and direct labor cost of $800. Therefore, the amount of the applied overhead is:
A. $1,800.
B. $2,200
C. $1,000
D. $800
E. $2,400
76. The Work in Process Inventory account of a manufacturing company that uses an
overhead rate based on direct labor cost has a $4,400 debit balance after all posting is
completed. The cost sheet of the one job still in process shows direct material cost of $2,000
and direct labor cost of $800. Therefore, the company’s overhead application rate is:
A. 40%.
B. 50%.
C. 80%.
D. 200%.
E. 220%.
77. A perpetual record of a raw materials item that records data on the quantity and cost of
units purchased, units issued for use in production, and units that remain in the raw materials
inventory, is called a(n):
A. Materials ledger card.
B. Materials requisition.
C. Purchase order.
D. Materials voucher.
E. Purchase ledger.
78. A source document that production managers use to request materials for production and
that is used to assign materials costs to specific jobs or to overhead is a:
A. Job cost sheet.
B. Production order.
C. Materials requisition.
D. Materials purchase order.
E. Receiving report.
79. A company that uses a job order costing system would make the following entry to record
the flow of direct materials into production:
A. debit Work in Process Inventory, credit Cost of Goods Sold.
B. debit Work in Process Inventory, credit Raw Materials Inventory.
C. debit Work in Process Inventory, credit Factory Overhead.
D. debit Factory Overhead, credit Raw Materials Inventory.
E. debit Finished Goods Inventory, credit Raw Materials Inventory.
80. The Work in Process Inventory account for DG Manufacturing follows. Compute the cost
of jobs completed and transferred to Finished Goods Inventory.
Work in Process Inventory
DR CR
Beginning balance 4,500
Direct materials 47,100
Direct labor 29,600 ? Finished goods
Applied overhead 15,800
Ending balance 8,900
The cost of units transferred to finished goods is:
A. $ 97,000.
B. $105,900.
C. $ 88,100.
D. $ 95,200.
E. $ 92,500
81. A company’s overhead rate is 60% of direct labor cost. Using the following incomplete
accounts, determine the cost of direct materials used.
Work in Process Inventory Finished Goods Inventory
DR CR DR CR
Beg. Bal. 100,800 Beg. Bal. 118,200
D.M. ? 324,800 301,000
D.L. ?
O.H. ? F. G. ?
End. Bal. 131,040 End. Bal. 142,000
Factory Overhead
DR CR
93,240 90,720
A. $106,400.
B. $113,120.
C. $ 30,240.
D. $211,680.
E. $324,800.
82. A source document that an employee uses to report how much time was spent working on
a job or on overhead activities and that is used to determine the amount of direct labor to
charge to the job or to determine the amount of indirect labor to charge to factory overhead is
called a:
A. Payroll Register.
B. Factory payroll record.
C. General Ledger.
D. Time ticket.
E. Factory Overhead Ledger.
83. When factory payroll costs for labor are allocated in a job cost accounting system:
A. Factory Payroll is debited and Work in Process Inventory is credited.
B. Work in Process Inventory and Factory Overhead are debited and Factory Payroll is
credited.
C. Cost of Goods Manufactured is debited and Direct Labor is credited.
D. Direct Labor and Indirect Labor are debited and Factory Payroll is credited.
E. Work in Process Inventory is debited and Factory Payroll is credited.
84. Oxford Company uses a job order costing system. In the last month, the system
accumulated labor time tickets total $24,600 for direct labor and $4,300 for indirect labor.
These costs were accumulated in Factory Payroll as they were paid. Which entry should
Oxford make to assign the Factory Payroll?
A. Debit Payroll Expense $28,900; credit Cash $28,900.
B. Debit Payroll Expense $24,600; debit Factory Overhead $4,300; credit Factory Payroll
$28,900.
C. Debit Work in Process Inventory $24,600; debit Factory Overhead $4,300; credit Factory
Payroll $28,900.
D. Debit Work in Process Inventory $24,600; debit Factory Overhead $4,300; credit Wages
Payable $28,900.
E. Debit Work in Process Inventory $28,900; credit Factory Payroll $28,900.
85. Labor costs in production can be:
A. Direct or indirect.
B. Indirect or sunk.
C. Direct or payroll.
D. Indirect or payroll.
E. Direct or sunk.
86. An example of direct labor cost is:
A. Supervisor salary
B. Maintenance worker wages
C. Janitor wages
D. Product assembler wages
E. Accountant salary
87. A company has an overhead application rate of 125% of direct labor costs. How much
overhead would be allocated to a job if it required total labor costing $20,000?
A. $ 5,000.
B. $ 16,000.
C. $ 25,000.
D. $125,000.
E. $250,000.
88. The rate established prior to the beginning of a period that uses estimated overhead and an
allocation factor such as estimated direct labor, and that is used to assign overhead cost to
jobs, is the:
A. Predetermined overhead rate.
B. Overhead variance rate.
C. Estimated labor cost rate.
D. Chargeable overhead rate.
E. Miscellaneous overhead rate.
89. Kayak Company uses a job order costing system and allocates its overhead on the basis of
direct labor costs. Kayak Company’s production costs for the year were: direct labor, $30,000;
direct materials, $50,000; and factory overhead applied $6,000. The overhead application rate
was:
A. 5.0%.
B. 12.0%.
C. 20.0%.
D. 500.0%.
E. 16.7%.
90. Lowden Company has an overhead application rate of 160% and allocates overhead based
on direct material cost. During the current period, direct labor cost is $50,000 and direct
materials used cost $80,000. Determine the amount of overhead Lowden Company should
record in the current period.
A. $ 31,250
B. $ 50,000
C. $ 80,000.
D. $ 128,000.
E. $ 208,000.
91. The overhead cost applied to a job during a period is recorded with a credit to Factory
Overhead and a debit to:
A. Jobs Overhead Expense.
B. Cost of Goods Sold.
C. Finished Goods Inventory.
D. Indirect Labor.
E. Work in Process Inventory.
92. CWN Company uses a job order costing system and last period incurred $80,000 of actual
overhead and $100,000 of direct labor. CWN estimates that its overhead next period will be
$75,000. It also expects to incur $100,000 of direct labor. If CWN bases applied overhead on
direct labor cost, its predetermined overhead rate for the next period should be:
A. 75%.
B. 80%.
C. 107%.
D. 125%.
E. 133%.
93. Cosi Company uses a job order costing system and allocates its overhead on the basis of
direct labor costs. Cosi expects to incur $800,000 of overhead during the next period, and
expects to use 50,000 labor hours at a cost of $10.00 per hour. What is Cosi Company’s
overhead application rate?
A. 6.25%.
B. 62.5%.
C. 160%.
D. 1600%.
E. 67%.
94. The B&T Company’s production costs for May are: direct labor, $13,000; indirect labor,
$6,500; direct materials, $15,000; property taxes on production equipment, $800; heat, lights
and power, $1,000; and insurance on plant and equipment, $200. B&T Company’s factory
overhead incurred for May is:
A. $ 2,000.
B. $ 6,500.
C. $ 8,500.
D. $21,500.
E. $36,500.
95. Mesa Corp. allocates overhead to production on the basis of direct labor costs. Mesa’s
total estimated overhead is $450,000 and estimated direct labor is $180,000. Determine the
amount of overhead to be allocated to finished goods inventory if there is $20,000 of total
direct labor cost in the jobs in the finished goods inventory.
A. $ 8,000.
B. $20,000.
C. $70,000.
D. $50,000.
E. $90,000.
96. Dallas Company uses a job order costing system. The company’s executives estimated that
direct labor would be $2,000,000 (200,000 hours at $10/hour) and that factory overhead
would be $1,500,000 for the current period. At the end of the period, the records show that
there had been 180,000 hours of direct labor and $1,200,000 of actual overhead costs. Using
direct labor hours as a base, what was the predetermined overhead rate?
A. $6.00 per direct labor hour.
B. $7.50 per direct labor hour.
C. $6.67 per direct labor hour.
D. $8.33 per direct labor hour.
E. $7.08 per direct labor hour.
97. Using the following accounts and an overhead rate of 90% of direct labor cost, determine
the amount of applied overhead.
Work in Process Inventory Finished Goods Inventory
DR
CR
DR
CR
Beg. Bal. 17,600 Beg. Bal. 5,200
D.M. 52,800 201,520
D.L. ?
O.H. ? F. G. ?
End. Bal. 36,080
A. $ 79,200.
B. $167,200.
C. $ 34,320.
D. $ 88,000.
E. $ 35,376.
98. If one unit of Product Z2 used $2.50 of direct materials and $3.00 of direct labor, sold for
$8.00, and was assigned overhead at the rate of 30% of direct labor costs, how much gross
profit was realized from this sale?
A. $8.00.
B. $5.50.
C. $2.50.
D. $1.60.
E. $0.90.
99. The ending inventory of finished goods has a total cost of $9,000 and consists of 600
units. If the overhead applied to these goods is $3,000, and the overhead rate is 75% of direct
labor, how much direct materials cost was incurred in producing these units?
A. $3,750.
B. $2,000.
C. $4,000.
D. $6,000.
E. $9,000.
100. At the current year-end, Simply Company found that its overhead was underapplied by
$2,500, and this amount was not considered material. Based on this information, Simply
should
A. Close the $2,500 to Cost of Goods Sold.
B. Close the $2,500 to Finished Goods Inventory.
C. Do nothing about the $2,500, since it is not material, and it is likely that overhead will be
overapplied by the same amount next year.
D. Carry the $2,500 to the income statement as “Other Expense”
E. Carry the $2,500 to the next period.
101. If overhead applied is less than actual overhead incurred, it is:
A. Fully applied.
B. Underapplied.
C. Overapplied.
D. Expected.
E. Normal.
102. The amount by which the overhead applied to jobs during a period exceeds the overhead
incurred during the period is known as:
A. Adjusted overhead.
B. Estimated overhead.
C. Predetermined overhead.
D. Underapplied overhead.
E. Overapplied overhead.
103. The amount by which overhead incurred during a period exceeds the overhead applied to
jobs is:
A. Balanced overhead.
B. Predetermined overhead.
C. Actual overhead.
D. Underapplied overhead.
E. Overapplied overhead.
104. If a company applies overhead to production with a predetermined overhead rate, a credit
balance in the Factory Overhead account at the end of the period means that:
A. The bookkeeper has made an error because the debits don’t equal the credits.
B. The balance will be carried forward to the next period as an overhead cost.
C. Actual overhead incurred was less than the overhead amount applied to production.
D. The overhead was underapplied for the period.
E. Actual overhead was greater than the overhead amount applied to production.
105. Marshall Enterprises charged the following amounts of overhead to jobs during the year:
$20,000 to jobs still in process, $60,000 to jobs completed but not sold, and $120,000 to jobs
finished and sold. At year-end, Marshall Enterprise’s Factory Overhead account has a credit
balance of $5,000, which is not a material amount. What entry should Marshall make at year–
end?
A. No entry is needed.
B. Debit Factory Overhead $5,000; credit Cost of Goods Sold $5,000.
C. Debit Cost of Goods Sold $5,000; credit Factory Overhead $5,000.
D. Debit Factory Overhead $5,000; credit Work in Process Inventory $5,000.
E. Debit Factory Overhead $5,000; credit Finished Goods Inventory $5,000.
106. Clemmens Company applies overhead based on direct labor cost. Estimated overhead
and direct labor costs for the year were $112,500 and $125,000, respectively. During the year,
actual overhead was $107,400 and actual direct labor cost was $120,000. The entry to close
the over– or underapplied overhead at year-end, assuming an immaterial amount, would
include:
A. A debit to Cost of Goods Sold for $600.
B. A credit to Factory Overhead for $600.
C. A credit to Finished Goods Inventory for $600.
D. A debit to Work in Process Inventory for $600.
E. A credit to Cost of Goods Sold for $600.
107. If overapplied or underapplied overhead is material, it should be disposed of by
allocating it to:
A. Cost of goods sold and finished goods inventory.
B. Finished goods inventory and work in process inventory.
C. work in process inventory, finished goods inventory, and cost of goods sold.
D. work in process inventory.
E. Raw materials inventory, work in process inventory, and finished goods inventory.
108. The Marina Corp. has applied overhead to jobs during the period as follows:
Jobs finished and sold ……………… $ 46,000
Jobs started and in process …………. 54,000
Jobs finished and unsold …………… 100,000
The application of overhead has resulted in a $5,600 credit balance in the Factory Overhead
account, and this amount is not material. The entry to dispose of this remaining factory
overhead balance is:
A. Debit Cost of Goods Sold $5,600; credit Factory Overhead $5,600.
B. Debit Factory Overhead $5,600; credit Cost of Goods Sold $5,600.
C. Debit Factory Overhead $5,600; credit Work in Process Inventory $5,600.
D. Debit Work in Process Inventory $5,600; credit Factory Overhead $5,600.
E. No entry is needed.
109. Andrew Industries purchased $165,000 of raw materials on account during the month of
March. The beginning Raw Materials Inventory balance was $22,000, and the materials used
to complete jobs during the month were $141,000 direct materials and $13,000 indirect
materials. What is the ending Raw Materials Inventory balance for March?
A. $46,000
B. $11,000
C. $33,000
D. $24,000
E. $9,000
110. Andrew Industries purchased $165,000 of raw materials on account during the month of
March. The beginning Raw Materials Inventory balance was $22,000, and the materials used
to complete jobs during the month were $141,000 direct materials and $13,000 indirect
materials. How should Andrews journalize the purchase of raw materials for March?
A. Debit Raw Materials Inventory $165,000; credit Accounts Payable $165,000
B. Debit Work In Process Inventory $165,000; credit Raw Materials Inventory $165,000
C. Debit Raw Materials Inventory $187,000; credit Cash $187,000
D. Debit Accounts Payable $165,000; credit Raw Materials Inventory $165,000
E. Debit Accounts Payable $187,000; credit Raw Materials Inventory $187,000
111. .Andrew Industries purchased $165,000 of raw materials on account during the month of
March. The beginning Raw Materials Inventory balance was $22,000, and the materials used
to complete jobs during the month were $141,000 direct materials and $13,000 indirect
materials. What amount will Andrew transfer to Work In Process Inventory for the month of
March?
A. $165,000
B. $154,000
C. $13,000
D. $141,000
E. $33,000
112. .Andrew Industries purchased $165,000 of raw materials on account during the month of
March. The beginning Raw Materials Inventory balance was $22,000, and the materials used
to complete jobs during the month were $141,000 direct materials and $13,000 indirect
materials. What journal entry should Andrew use to account for direct materials used in
March:
A. Debit Raw Materials Inventory $141,000; credit Accounts Payable $141,000.
B. Debit Work in Process Inventory $141,000; credit Raw Materials Inventory $141,000.
C. Debit Work in Process Inventory $141,000; credit Accounts Payable $141,000.
D. Debit Finished Goods Inventory $22,000; credit Raw Materials Inventory $22,000.
E. Debit Raw Materials Inventory $153,000; credit Work In Process $153,000.
113. Juarez Builders incurred $285,000 of labor costs for construction jobs completed during
the month of August, of which $212,000 was direct and $73,000 was indirect supervisory
costs. The correct journal entry to record the direct labor for the month is:
A. Debit Payroll Expense $212,000; credit Cash $212,000.
B. Debit Factory Wages Payable $285,000; credit Work in Process Inventory $212,000.
C. Debit Work in Process Inventory $212,000; credit Cash $285,000.
D. Debit Factory Wages $285,000; credit Factory Wages Payable $285,000.
E. Debit Work in Process Inventory $212,000; credit Factory Wages Payable $212,000
114. Juarez Builders incurred $285,000 of labor costs for construction jobs completed during
the month of August, of which $212,000 was direct and $73,000 was indirect supervisory
costs. The correct journal entry to record the $73,000 indirect labor for the month is:
A. Debit Supervisor Wage Expense; credit Factory Wages Payable.
B. Debit Factory Overhead; credit Factory Wages Payable.
C. Debit Supervisor Wage Expense; credit Factory Overhead.
D. Debit Factory Wages Payable; credit Factory Overhead.
E. Debit Factory Wage Expense; credit Cash.
115. Minstrel Manufacturing uses a job order costing system. During one month Minstrel
purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of
which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, paid in cash, of
which $40,000 was indirect labor. Minstrel uses a predetermined overhead rate of 150% of
direct labor cost. The journal entry to record the purchase of materials is:
A. Debit Raw Materials Inventory $198,000; credit Accounts Payable $198,000.
B. Debit Work in Process Inventory $198,000; credit Accounts Payable $198,000.
C. Debit Raw Materials Inventory $198,000; credit Work in Process Inventory $198,000.
D. Debit Work in Process Inventory $195,000; credit Raw Materials Inventory $195,000.
E. Debit Raw Materials Inventory $198,000; credit Finished Goods Inventory $198,000.
116. Minstrel Manufacturing uses a job order costing system. During one month Minstrel
purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of
which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, paid in cash, of
which $40,000 was indirect labor. Minstrel uses a predetermined overhead rate of 150% of
direct labor cost. The journal entry to record the issuance of materials to production is:
A. Debit Raw Materials Inventory $195,000; credit Accounts Payable $195,000.
B. Debit Work in Process Inventory $195,000; credit Raw Materials Inventory $195,000.
C. Debit Raw Materials Inventory $195,000; credit Work in Process Inventory $195,000.
D. Debit Work in Process Inventory $165,000; debit Factory Overhead $30,000; credit Raw
Materials Inventory $195,000.
E. Debit Finished Goods Inventory $195,000; credit Raw Materials Inventory $195,000.
117. Minstrel Manufacturing uses a job order costing system. During one month Minstrel
purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of
which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, paid in cash, of
which $40,000 was indirect labor. Minstrel uses a predetermined overhead rate of 150% of
direct labor cost. The journal entry to record payment of the factory payroll is:
A. Debit Work in Process Inventory $150,000; credit Factory Wages Payable $150,000.
B. Debit Work in Process Inventory $150,000; credit Cash $150,000.
C. Debit Factory Wages Payable $150,000; credit Cash $150,000.
D. Debit Work in Process Inventory $110,000; debit Factory Overhead $40,000; credit
Factory Wages Payable $150,000.
E. Debit Work in Process Inventory $110,000; debit Factory Overhead $40,000; credit Cash
$150,000.
118. Minstrel Manufacturing uses a job order costing system. During one month Minstrel
purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of
which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, paid in cash, of
which $40,000 was indirect labor. Minstrel uses a predetermined overhead rate of 150% of
direct labor cost. The journal entry to record the allocation of the factory payroll to production
is:
A. Debit Work in Process Inventory $150,000; credit Factory Wages Payable $150,000.
B. Debit Work in Process Inventory $150,000; credit Cash $150,000.
C. Debit Factory Wages Payable $150,000; credit Cash $150,000.
D. Debit Work in Process Inventory $110,000; debit Factory Overhead $40,000; credit
Factory Wages Payable $150,000.
E. Debit Work in Process Inventory $110,000; debit Factory Overhead $40,000; credit Cash
$150,000.
119. Minstrel Manufacturing uses a job order costing system. During one month Minstrel
purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of
which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, paid in cash, of
which $40,000 was indirect labor. Minstrel uses a predetermined overhead rate of 150% of
direct labor cost. The journal entry to record the application of factory overhead to production
is:
A. Debit Work in Process Inventory $225,000; credit Factory Overhead $225,000.
B. Debit Work in Process Inventory $165,000; credit Factory Overhead $165,000.
C. Debit Factory Payroll $150,000; credit Work in Process Inventory $150,000.
D. Debit Factory Overhead $165,000; credit Work in Process Inventory $165,000.
E. Debit Work in Process Inventory $165,000; credit Factory Payroll $165,000.
120. Minstrel Manufacturing uses a job order costing system. During one month Minstrel
purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of
which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, paid in cash, of
which $40,000 was indirect labor. Minstrel uses a predetermined overhead rate of 150% of
direct labor cost. The total manufacturing costs added during the period are:
A. $440,000.
B. $470,000.
C. $500,000.
D. $570,000.
E. $540,000.
121. Minstrel Manufacturing uses a job order costing system. During one month Minstrel
purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of
which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, paid in cash, of
which $40,000 was indirect labor. Minstrel uses a predetermined overhead application rate of
150% of direct labor cost. If Minstrel incurred total overhead costs of $167,800 during the
month, compute the amount of under- or overapplied overhead:
A. $2,800 overapplied.
B. $17,800 underapplied.
C. $2,800 underapplied.
D. $17,800 overapplied.
E. $57,200 overapplied.
122. Minstrel Manufacturing uses a job order costing system. During one month Minstrel
purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of
which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, paid in cash, of
which $40,000 was indirect labor. Minstrel uses a predetermined overhead application rate of
150% of direct labor cost. Minstrel’s beginning and ending Work in Process Inventory are
$15,500 and $27,000 respectively. Compute the cost of product transferred to Finished Goods
Inventory:
A. $558,500.
B. $440,000.
C. $413,000.
D. $428,500.
E. $415,000.
123. Finished goods inventory is $190,000. If overhead applied to these goods is $72,000, and
the overhead rate is 120% of direct labor, how much direct materials cost was incurred in
producing the inventory?
A. $31,600.
B. $58,000.
C. $56,000.
D. $60,000.
E. $86,400.
124. Adams Manufacturing allocates overhead to production on the basis of direct labor costs.
At the beginning of the year, Adams estimated total overhead of $396,000; materials of
$410,000 and direct labor of $220,000. During the year Adams incurred $418,000 in materials
costs, $413,200 in overhead costs and $224,000 in direct labor costs. Compute the overhead
application rate.
A. 180%.
B. 55.6%.
C. 186%.
D. 184%.
E. 96.6%.
125. Adams Manufacturing allocates overhead to production on the basis of direct labor costs.
At the beginning of the year, Adams estimated total overhead of $396,000; materials of
$410,000 and direct labor of $220,000. During the year Adams incurred $418,000 in materials
costs, $413,200 in overhead costs and $224,000 in direct labor costs. Compute the amount of
overhead applied to jobs during the year.
A. $396,000.
B. $424,450.
C. $413,190.
D. $413,200.
E. $403,200.
126. Adams Manufacturing allocates overhead to production on the basis of direct labor costs.
At the beginning of the year, Adams estimated total overhead of $396,000; materials of
$410,000 and direct labor of $220,000. During the year Adams incurred $418,000 in materials
costs, $413,200 in overhead costs and $224,000 in direct labor costs. Compute the amount of
under- or overapplied overhead for the year.
A. $10,000 overapplied.
B. $17,200 overapplied.
C. $10,000 underapplied.
D. $17,200 underapplied.
E. $4,800 underapplied.
128. Portside Watercraft uses a job order costing system. During one month Portside
purchased $153,000 of raw materials on credit; issued materials to production of $164,000 of
which $24,000 were indirect. Portside incurred a factory payroll of $95,000, paid in cash, of
which $25,000 was indirect labor. Portside uses a predetermined overhead rate of 170% of
direct labor cost. The journal entry to record the issuance of materials to production is:
A. Debit Raw Materials Inventory $153,000; credit Accounts Payable $153,000.
B. Debit Work in Process Inventory $140,000; debit Factory Overhead $24,000; credit Raw
Materials Inventory $164,000.
C. Debit Raw Materials Inventory $195,000; credit Work in Process Inventory $195,000.
D. Debit Work in Process Inventory $140,000; debit Raw Materials Inventory $24,000; credit
Materials Inventory $164,000.
E. Debit Finished Goods Inventory $140,000; credit Raw Materials Inventory $140,000.
129. Portside Watercraft uses a job order costing system. During one month Portside
purchased $153,000 of raw materials on credit; issued materials to production of $164,000 of
which $24,000 were indirect. Portside incurred a factory payroll of $95,000, paid in cash, of
which $25,000 was indirect labor. Portside uses a predetermined overhead rate of 170% of
direct labor cost. The journal entry to record the allocation of factory payroll to production is:
A. Debit Work in Process Inventory $95,000; credit Factory Payroll $95,000.
B. Debit Work in Process Inventory $95,000; credit Cash $95,000.
C. Debit Factory Payroll $95,000; credit Cash $95,000.
D. Debit Work in Process Inventory $70,000; debit Factory Overhead $25,000; credit Factory
Payroll $95,000.
E. Debit Work in Process Inventory $70,000; debit Factory Overhead $25,000; credit Cash
$95,000.
130. Portside Watercraft uses a job order costing system. During one month Portside
purchased $153,000 of raw materials on credit; issued materials to production of $164,000 of
which $24,000 were indirect. Portside incurred a factory payroll of $95,000, paid in cash, of
which $25,000 was indirect labor. Portside uses a predetermined overhead rate of 170% of
direct labor cost. The journal entry to record the application of factory overhead to production
is:
A. Debit Work in Process Inventory $55,800; credit Factory Overhead $55,800.
B. Debit Work in Process Inventory $161,500; credit Factory Overhead $161,500.
C. Debit Work in Process Inventory $119,000; credit Factory Overhead $119,000.
D. Debit Factory Overhead $119,000; credit Work in Process Inventory $119,000.
E. Debit Work in Process Inventory $95,000; credit Factory Payroll $95,000.
131. Copy Center pays an average wage of $12 per hour to employees for printing and
copying jobs, and allocates $18 of overhead for each employee hour worked. Materials are
assigned to each job according to actual cost. If Job M-47 used $350 of materials and took 20
hours of labor to complete, what is the total cost that should be assigned to the job?
A. $590
B. $600
C. $380
D. $950
E. $710
132. Copy Center pays an average wage of $12 per hour to employees for printing and
copying jobs, and allocates $18 of overhead for each employee hour worked. Materials are
assigned to each job according to actual cost. Jobs are marked up 20% above cost to
determine the selling price. If Job M-47 used $350 of materials and took 20 hours of labor to
complete, what is the selling price that should be assigned to the job?
A. $852
B. $1,140
C. $456
D. $720
E. $708
133. Match the following terms to the appropriate definition.
A. Cost accounting system
B. Time ticket
C. Finished Goods Inventory
D. Materials requisition
E. Underapplied overhead
F. Work In Process Inventory
G. Overapplied overhead
H. Job cost sheet
I. Job order costing system
J. Predetermined overhead rate
K. Materials ledger card
_______ 1. The production of products in response to special orders; also called customized
production.
_______ 2. Records manufacturing activities using a perpetual inventory system.
_______ 3. The amount by which the overhead applied to jobs in a period with the
predetermined overhead rate exceeds the actual overhead incurred in a period.
_______ 4. An asset account where costs are accumulated while jobs are being produced.
_______ 5. The rate established prior to the beginning of a period that relates estimated
overhead to an allocation factor such as estimated direct labor and is used to assign overhead
cost to a job.
_______ 6. An asset account where costs of completed jobs reside until the jobs are delivered
to customers.
_______ 7. A source document that production managers use to request materials needed for
manufacturing and that is used to assign materials costs to specific jobs or to overhead.
_______ 8. A perpetual record that is updated each time units of raw material are purchased
and issued for use in production.
_______ 9. A source document that is used to report how much time an employee spent
working on a job or on overhead activities and the labor costs to assign to jobs or overhead.
_______10. The amount by which actual overhead incurred in a period exceeds the overhead
applied to jobs with the predetermined overhead rate.
_______11. A separate record maintained for each job in a job order costing system; it shows
the costs of direct materials, direct labor, and overhead for each job.
1. I; 2. A; 3. G; 4. F; 5. J; 6. C; 7. D; 8. K; 9. B; 10. E; 11. H
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
15-59
Blooms: Remember
AACSB: Communication
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 1Easy
Learning Objective: 15-C1
Learning Objective: 15-C2
Learning Objective: 15-P1
Learning Objective: 15-P2
Learning Objective: 15-P4
Topic: Job Order Costing
Topic: Job Cost Sheet
Topic: Materials Cost Flows and Documents
Topic: Labor Cost Flows and Documents
Topic: Underapplied or Overapplied Overhead
Short Answer Questions
134. What is a cost accounting system? What are the two basic types of cost accounting
systems?
135. Describe the purpose of a job cost sheet, and explain what information is found on the
job cost sheet.
136. Explain how a service firm, such as an advertising agency, might use job order costing.
137. Describe how materials flow through a job order costing system, and identify the key
documents in the system.
138. Describe the flow of the raw materials, both direct and indirect, through the inventory
accounts from purchase to use.
139. Describe the flow of labor costs in a job order costing system, and identify the
documents used in the system.
140. Describe the flow of the employee labor, both direct and indirect, through the inventory
accounts.
141. Explain what a predetermined overhead rate is, how it is calculated, and why it is used.
142. Explain why the Factory Overhead account for a company may have a difference
between the amount debited and credited at the end an accounting period before adjustment.
143. Briefly describe how manufacturing firms dispose of overapplied or underapplied factory
overhead.
144. The Merker Manufacturing Company has the following job cost sheets on file. They
represent jobs that have been worked on during April of the current year. This table
summarizes information provided on each sheet:
Number Total Cost Incurred Status of Job
544 $15,050 Finished and delivered
545 $22,400 Finished and delivered
546 $ 7,500 Finished and unsold
547 $ 4,300 Finished and delivered
548 $33,000 Unfinished
549 $62,000 Finished and unsold
550 $14,600 Unfinished
551 $22,200 Finished and delivered
552 $ 3,600 Finished and unsold
553 $ 1,000 Unfinished
(a) What is the cost of goods sold for the month of April?
(b) What is the cost of the Work in Process inventory on April 30?
(c) What is the cost of the finished goods inventory on April 30?
145. The Luna Manufacturing Company has the following job cost sheets on file. They
represent jobs that have been worked on during September of the current year. This table
summarizes information provided on each sheet:
Number Total Cost Incurred Status of Job
951 $ 4,200 Finished and delivered
952 $ 7,700 Unfinished
953 $ 9,300 Finished and unsold
954 $11,100 Finished and delivered
955 $ 3,000 Finished and unsold
956 $ 5,500 Finished and delivered
957 $35,000 Unfinished
958 $ 3,200 Finished and delivered
959 $ 500 Unfinished
960 $22,110 Unfinished
961 $ 7,200 Finished and delivered
962 $ 8,500 Unfinished
963 $11,200 Finished and unsold
(a) What is the cost of the Work in Process inventory on September 30?
(b) What is the cost of the finished goods inventory on September 30?
(c) What is the cost of goods sold for the month of September?
146. Chung Corporation uses a job order costing system. Five jobs were worked on during the
current year. The predetermined overhead rate is 20% of direct labor costs. The following cost
information is available (all materials and time ticket information applies to direct costs):
Job Materials Requisitions Time Tickets
101 $66,000 $32,000
102 $63,000 $74,000
103 $39,000 $50,000
104 $32,000 $36,000
105 $53,000 $68,000
Part 1–Complete the job cost sheets for each job.
Job No. 101 Job No. 102 Job No. 103
Materials Materials Materials
Labor Labor Labor
Overhead Overhead Overhead
Total Cost Total Cost Total Cost
Status In Process Status Sold Status Finished
Job No. 104 Job No. 105
Materials Materials
Labor Labor
Overhead Overhead
Total Cost Total Cost
Status Sold Status Finished
Part 2–Identify the amounts of each of the following accounts at the end of the period
a. Work in Process____________________
b. Finished Goods____________________
c. Cost of Goods Sold____________________
147. The following data relates to the Mass Company’s first operating period. Calculate the
total cost of goods sold for each product.
Overhead
rate
Cost/unit Units (Percent
Direct Direct Ending of Direct
Product
Materials
Labor
Produced
Inventory
Labor cost
)
A $10 $12 215 115 60%
B 8 15 330 180 40%
C 14 10 250 200 80%
148. Southwick Company uses a job order costing system. On November 1, $15,000 of direct
materials and $3,500 of indirect materials were requisitioned for production. Prepare the
general journal entries to record this requisition.
149. A company that uses a job order costing system incurred $10,000 of factory payroll
during May. Present the May 31 entry assuming $8,000 is direct labor and $2,000 is indirect
labor.
150. Time tickets for factory employees during the month of August are summarized as
follows:
Job 919………………………………………… $ 9,800
Job 920………………………………………… 14,650
Job 921………………………………………… 12,250
Job 922………………………………………… 16,000
Total direct labor………………………………. $52,700
Indirect labor…………………………………… 16,800
Total labor cost………………………………… $69,500
Make the necessary journal entries to record factory payroll for direct and indirect labor.
Work in Process ……………………… 52,700
Factory Wages Payable
…………………… 52,700
Factory Overhead …………………….. 16,800
Factory Wages Payable
…………………… 16,800
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2-Medium
Learning Objective: 15-P2
Topic: Labor Cost Flows and Documents
151. Chumley Advertising Agency contracted with a company to prepare an ad campaign.
Chumley uses a job order costing system. Chumley estimates that the job will take 140
designer hours at $90 per hour and 85 staff hours at $45 per hour. Chumley uses two overhead
rates in applying overhead to jobs: Designer-related at $100 per designer hour and staff-
related at $50 per staff hour. Determine the total estimated cost for this job.
152. KL Company uses a job order costing system. During the month of July, the following
events occurred:
(a) Purchased raw materials on credit, $32,000.
(b) Raw materials requisitioned: $25,800 as direct materials and $10,500 indirect materials.
(c) Assigned the factory payroll totaling $37,700, which includes $8,200 indirect labor, to jobs
and overhead.
Make the necessary journal entries to record the above transactions and events.
153. EXP, Inc. had the following activities during its most recent period of operations:
(a) Purchased raw materials on account for $140,000 (both direct and indirect materials are
recorded in the Raw Materials Inventory account).
(b) Issued raw materials to production of $130,000 (80% direct and 20% indirect).
(c) Incurred factory labor costs of $250,000; allocated the factory labor costs to production
(70% direct and 30% indirect).
(d) Incurred factory utilities costs of $20,000; this amount is still payable.
(e) Applied overhead at 80% of direct labor costs.
(f) Recorded factory depreciation, $22,000.
Prepare journal entries to record the above transactions.
154. Lock Production Co. applies factory overhead to production on the basis of direct labor
costs. Assume that at the beginning of the current year the company estimated that direct
material costs would be $178,800, direct labor costs would be $154,000, and factory overhead
costs would be $231,000.
(1) If the $28,000 cost of Lock’s Work in Process inventory included $5,200 of direct labor
cost, what amount of direct materials cost was included?
(2) If $8,100 of the company’s $34,300 finished goods inventory was direct materials cost,
determine the direct labor cost and factory overhead cost of the finished goods inventory.
155. Prepare journal entries to record the following transactions and events for April using a
job order costing system.
(a) Purchased raw materials on credit, $69,000.
(b) Raw materials requisitioned: $26,000 direct and $5,400 indirect.
(c) Factory payroll totaled $46,000, including $9,500 indirect labor.
(d) Paid other actual overhead costs totaling $14,500 cash.
(e) Applied overhead totaling $28,200.
(f) Finished and transferred jobs totaling $77,500.
(g) Jobs costing $58,800 were sold on credit for $103,000.
156. A company’s ending inventory of finished goods has a cost of $45,000 and consists of
750 units. If the overhead applicable to these goods is $8,400, and overhead is applied at the
rate of 60% of direct labor, what is the cost of the direct materials used to produce these
units?
157. The production of one unit of Product BJM used $27.50 of direct materials and $21.00 of
direct labor. The unit sold for $76.00 and was assigned overhead at a rate of 30% of labor
costs. What is the gross profit per unit on its sale?
158. A company uses a job order costing system and applies overhead on the basis of direct
labor cost. A summary of the company’s Work in Process Inventory account for December
appears below.
Work in Process
Date Explanation PR Debit Credit Balance
Dec. 1 73,800
Dec. Direct Materials G-20 235,800 309,600
Dec. Direct Labor G-20 117,000 426,600
Dec. Factory Overhead G-20 187,200 613,800
Dec. Job No. 5 completed G-8 90,900 522,900
Dec. Job No. 6 completed G-10 131,400 391,500
Dec. Job No. 7 completed G-12 73,800 317,700
Dec. 31 Job No. 8 completed G-15 168,300 149,400
Fill in the blanks for the following:
(1) The total cost of the direct materials, direct labor, and factory overhead applied in the
December 31 Work in Process inventory is $_______________________.
(2) The company’s overhead application rate is __________________%
(3) Job No. 6 had $26,550 of direct labor cost. Therefore, the job must have had $________
of direct materials cost.
(4) Job No. 8 had $73,998 of direct materials cost. Therefore, the job must have had
$________ of factory overhead cost.
159. Heintz Company’s job order costing system applies overhead based on direct labor costs.
The company’s manufacturing costs for the current year were: direct materials, $108,000;
direct labor, $144,000; and factory overhead, $36,000. At year-end, the total cost of Work in
Process is $38,000, which includes $12,000 of direct labor cost. What amount of direct
material cost is included in the ending Work in Process inventory?
160. MOB Corp. maintains an internet-based general ledger. Overhead is applied on the basis
of direct labor costs. Its bookkeeper accidentally deleted most of the entries that had been
recorded for January. A printout of the general ledger (in T-account form) showed the
following:
Raw Materials Inventory Work in Process Inventory
DR
CR
DR CR
Ba1.1/1 10,000 Bal 1/1 4,000 f)
a) b) c)
d)
e)
17,500 g)
Accounts Payable Finished Goods Inventory
DR CR DR
C
R
h) Bal. 1/1 5,000 j) l)
i) k)
Bal. 1/31 9,000 Bal. 1/31 15,000
Factory Overhead
Cost of Goods Sold
DR CR DR CR
m) n) o)
A review of the prior year’s financial statements, the current year’s budget, and January’s
source documents produced the following information:
(1) Accounts Payable is used for raw material purchases only. January purchases were
$49,000.
(2) Factory overhead costs for January were $17,000 none of which is indirect materials.
(3) The January 1 balance for finished goods inventory was $10,000.
(4) There was a single job in process at January 31 with a cost of $2,000 for direct materials
and $1,500 for direct labor.
(5) Total cost of goods manufactured for January was $90,000.
(6) All direct laborers earn the same rate ($13/hour). During January, 2,500 direct labor hours
were worked.
(7) The predetermined overhead rate is based on direct labor costs. Budgeted (expected)
overhead for the year is $195,000 and budgeted (expected) direct labor is $390,000.
Fill in the missing amounts a through o above in the T–accounts above.
d) DL 32,500
e) OH 16,250
f) COGM 90,000
17,500 g) 4,250
Accounts Payable
Finished Goods Inventory
DR
CR
DR
CR
h) 45,000
Bal. 1/1 5,000
j) Bal 1/1 10,000
i) 49,000
k) COGM 90,000
1) 85,000
Bal. 1/31 9,000
Bal. 1/31 15,000
Factory Overhead
Cost of Goods Sold
DR CR DR CR
m) OH 17,000
1117,00017,000
n) OH 16,250 o) 85,000
(actual)
(applied)
Blooms: Apply
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: 15-P1
Learning Objective: 15-P2
Learning Objective: 15-P3
Topic: Materials Cost Flows and Documents
Topic: Labor Cost Flows and Documents
Topic: Overhead Cost Flows and Documents
161. Chen Service applied overhead on the basis of direct labor costs during the current year.
Overhead applied was $16,500. Actual overhead incurred was $17,200.
(a) Prepare a journal entry to remove this difference assuming that it is not material.
(b) Instead, assume actual overhead incurred was $24,000. Describe (without computations)
the alternative procedure that Chen might assuming this difference is material.
162. Calwell Corp. uses a job order costing system. Four jobs were started during the current
year. The following is a record of the costs incurred:
Job #
Material
Used
Direct Labor
Used
Direct Labor
Hours Used
1010 $45,000 $72,000 8,000
1011 59,000 77,000 7,000
1012 35,000 30,000 3,000
1013 26,000 40,000 5,000
Actual overhead costs were $55,800. The predetermined overhead rate is $2.40 per direct
labor hour. During the year, Jobs 1010, 1012, and 1013 were completed. Also, Jobs 1010 and
1013 were sold for $387,000. Assuming that this is Calwell’s first year of operations:
(a) Make the necessary journal entries to charge the costs to the jobs started and to record the
completion and sale of finished jobs.
(b) Calculate the balance in the Work in Process Inventory, Finished Goods Inventory, and
Factory Overhead accounts. Does the Factory Overhead account balance indicate an over– or
underapplied overhead?
163. The following information is available for the Annum Corporation for the current year:
Cost of goods sold ………………………….. $292,000
Depreciation of factory equipment …………. 25,200
Direct labor …………………..……………… 64,750
Finished goods inventory, Beginning-year …. 45,000
Factory insurance …………………………… 11,200
Factory utilities ……………………………… 16,800
Goods transferred from Work in Process
Inventory to Finished Goods Inventory …… 285,150
Indirect labor ………………………………… 8,400
Raw materials inventory, Beginning-year……. 4,200
Raw materials purchased ……………………. 116,200
Raw materials used in production
(includes $7,000 of indirect materials) …….. 121,800
Rent on factory building ……………………… 22,400
Annum Company uses a predetermined overhead rate of 150% of direct labor cost. Prepare
journal entries for the following transactions and events:
(a) Purchase of raw materials on account.
(b) Assignment of materials costs to Work in Process Inventory and Factory Overhead.
(c) Assignment of Factory Payroll to Work in Process Inventory and Factory Overhead.
(d) Recording of other factory overhead. Assume that all items other than depreciation are
paid in cash.
(e) Assignment of Factory Overhead to Work in Process Inventory.
(f) Transfer of goods completed to Finished Goods Inventory.
(g) Recording cost of goods sold.
(h) Assignment of over– or underapplied overhead to Cost of Goods Sold.
164. A company’s predetermined overhead rate is applied at 130% of direct labor cost. How
much overhead would be allocated to Job No. 105 if it required total direct labor costs of
$60,000?
165. A company’s predetermined overhead rate is applied at 150% of direct materials cost.
How much overhead would be allocated to Job No. 325 if the total direct materials costs was
$40,000?
166. Selected information from the budget of the Singh Corp. at the beginning of the year
follows:
Estimated factory overhead...... $132,000
Estimated direct labor hours.....
55,000 hours
Estimated machine hours………
41,250 hours
Estimated direct labor cost.......
$825,000
Actual factory overhead
incurred during the year…….. $144,000
Calculate the predetermined overhead rate if the company uses the following as a basis:
(a) Direct labor hours.
(b) Direct labor cost.
(c) Machine hours.
167. A manufacturing company uses an overhead rate based on direct labor cost. The
company’s Work in Process Inventory account has a $15,000 debit balance after all posting is
completed, and the cost sheet of the one job still in process shows direct material costs of
$6,600 and direct labor costs of $3,000. What is the company’s overhead application rate?
168. Nutley Company uses a job order cost system and last period incurred $70,000 of
overhead and $100,000 of direct labor. Nutley estimates that its overhead next period will be
$65,000. The company also expects to incur $100,000 of direct labor. If Nutley bases its
overhead applied on direct labor cost, what should be the overhead rate for the next period?
$65, 000 65%
$100,000 =
169. A company’s job order costing system applies overhead based on direct labor cost. The
company’s estimated production costs for were: direct labor, $57,600; direct materials,
$76,800; and factory overhead, $9,600. Calculate the company’s overhead rate.
170. The job cost sheet for Job number 83-421 includes the following information:
DIRECT MATERIALS:
7/12 Requisition R88-566: 20 units @ $ 3.50 per unit
7/13 Requisition R88-576: 18 units @ $ 5.00 per unit
7/13 Requisition R88-578: 4 units @ $25.00 per unit
7/14 Requisition R88-591: 40 units @ $ 1.25 per unit
DIRECT LABOR:
7/12 Employee 19: 8 hours @ $ 9.00 per hour
7/13 Employee 19: 6 hours @ $ 9.00 per hour
7/13 Employee 37: 6 hours @ $ 7.00 per hour
7/14 Employee 19: 5 hours @ $ 9.00 per hour
7/14 Employee 92: 5 hours @ $11.00 per hour
FACTORY OVERHEAD: Assigned at 150% of direct labor cost.
What is the total cost of Job number 83-421?
171. The following calendar year information about the Tchulahota Corporation is available
on December 31:
Advertising expense…………………………… $ 28,800
Depreciation of factory equipment…………… 42,320
Depreciation of office equipment…………….. 10,800
Direct labor…………………………………… 142,600
Factory utilities………………………………… 35,650
Interest expense………………………………… 6,650
Inventories, January 1:
Raw materials…………………………… 3,450
Work in Process………………………… 17,250
Finished goods…………………………… 35,600
Inventories, December 31:
Raw materials…………………………….. 2,300
Work in Process………………………….. 20,700
Finished goods…………………………… 31,050
Raw materials purchases……………………… 132,450
Rent on factory building……………………… 41,400
Indirect labor………………………………….. 51,750
Sales commissions…………………………….. 16,500
The company applies overhead on the basis of 125% of direct labor costs. Calculate the
amount of over- or underapplied overhead.
172. The predetermined overhead rate for Foster, Inc., is based on estimated direct labor costs
of $400,000 and estimated factory overhead of $500,000. Actual costs incurred were:
Direct materials…………………………….. $240,000
Direct labor………………………………….. 410,000
Indirect materials…………………………… 55,000
Indirect labor……………………………….. 125,000
Sales commissions…………………………. 55,000
Factory depreciation………………………… 170,000
Property taxes, factory……………………… 15,000
Factory utilities…………………………….. 35,000
Advertising………………………………….. 62,500
Factory equipment rental…………………… 110,000
(a) Calculate the predetermined overhead rate and calculate the overhead applied during the
year.
(b) Determine the amount of over- or underapplied overhead and prepare the journal entry to
eliminate the over- or underapplied overhead assuming that it is not material in amount.
173. A company charged the following amounts of overhead to jobs during the current year:
$12,000 to jobs still in process, $42,000 to jobs completed but not sold, and $66,000 to jobs
finished and sold. At year-end, the company’s Factory Overhead account has a credit balance
of $9,000, which is not a material amount. What entry (if any) should the company make at
year-end related to this overhead balance?
174. Oddley Corp. uses a job order costing system. The following is selected information
pertaining to costs applied to jobs during the year:
Jobs still in process at the end of the year:
$167,000, which includes $65,000 direct labor costs.
Jobs finished and sold during the year:
$395,000, which includes $172,000 direct labor costs.
Jobs finished but unsold during the year:
$103,000, which includes $38,000 direct labor costs.
Oddley Corp.’s predetermined overhead rate is 60% of direct labor cost. At the end of the
year, the company’s records show that $189,000 of factory overhead has been incurred.
(a) Determine the amount of overapplied or underapplied overhead.
(b) Prepare the necessary journal entry to close the Factory Overhead account assuming that
any remaining balance is not material.
175. Taylor Corp. uses a job order costing system and worked only on Job 101 during the
current period. Job 101 was sold for $460,000. The following information pertains to costs
incurred for Job 101.
Direct Materials $90,000
Indirect Materials $30,000
Direct Labor $130,000
Indirect Labor $75,000
Depreciation of Machinery $10,000
Factory Supplies $8,000
Overhead Application Rate 90% of direct labor
Determine the amount of gross profit earned on Job 101.
176. At the end of June, the job cost sheets for Kennedy Manufacturing show the following
total costs accumulated on three custom jobs.
Job 203 Job 204 Job 205
Direct materials $32,000 $47,000 $43,000
Direct labor 18,000 22,000 25,000
Overhead 26,100 31,900 36,250
Job 203 was started in production in May and the following costs were assigned to it in May:
direct materials, $12,000; direct labor, $6,000; and overhead $8,700. Jobs 204 and 205 are
started in June. Overhead cost is applied with a predetermined rate based on direct labor cost.
Jobs 203 and 204 are finished in June, and Job 205 will be finished in July. No raw materials
are used indirectly in June. Using this information, answer the following questions assuming
the company’s predetermined overhead rate did not change.
a. What is the cost of the raw materials requisitioned in June for each of the three jobs?
b. How much direct labor cost is incurred during June for each of the three jobs?
c. What predetermined overhead rate is used during June?
d. How much total cost is transferred to finished goods during June?
177. Booth Manufacturing uses a job order costing system that charges overhead to jobs on
the basis of direct material cost. At year-end, the Work in Process Inventory account shows
the following.
Date Explanation Debit Credit Balance
Dec. 31 Direct materials cost 980,000 980,000
31 Direct labor cost 320,000 1,300,000
31 Overhead costs 637,000 1,937,000
31 To finished goods 1,818,000 119,000
a. Determine the overhead rate used (based on direct material cost).
b. Only one job remained in the Work in Process inventory at December 31. Its direct
materials cost is $60,000. How much direct labor cost and overhead cost are assigned to it?
178. Franklin Manufacturing uses a job order costing system that charges overhead to jobs on
the basis of direct labor cost. Franklin used the following cost predictions: overhead costs
$1,285,750, and direct labor costs of $695,000. At year-end, the company’s records show that
actual overhead costs for the year are $1,278,800, and actual direct labor costs are $692,000.
a. Determine the predetermined overhead rate for the year.
b. Compute the amount of overapplied or underapplied overhead.
c. Prepare the adjusting entry to allocate the over- or underapplied overhead assuming the
amount if immaterial.
179. Drop Anchor takes special orders to manufacture sail boats for high end customers.
Complete the job cost sheets for Drop Anchor for September based on the following
information. Prepare journal entries to record the transactions as well as post to the job cost
sheets.
a. Purchased raw materials on credit, $145,000.
b. Materials requisitions: Job 240, $48,000; Job 241, $36,000; Job 242, $42,000; indirect
materials were $12,000.
c. Time tickets used to charge labor to jobs: Job 240, $40,000; Job 241, $30,000; Job 242,
$35,000, indirect labor is $25,000.
d. The company incurred the following additional overhead costs: depreciation of factory
building, $70,000; depreciation of factory equipment, $60,000; expired factory insurance,
$10,000; utilities and maintenance cost of $20,000 were paid in cash.
e. Applied overhead to all three jobs. The predetermined overhead rate is 190% of direct labor
cost.
f. Transferred jobs 240 and 242 to Finished Goods Inventory.
g. Sold job 240 for $300,000 for cash.
h. Closed the under– or over-applied overhead account balance.
Job Cost Sheets
240 241 242 Total
For the current month
Direct materials
Direct labor
Applied overhead
Total costs
180. The predetermined overhead rate for Shilling Manufacturing is based on estimated direct
labor costs of $350,000 and estimated factory overhead of $770,000. Actual costs incurred
were:
Direct materials…………………………………….….….….….. $475,000
Direct labor…………………………………………………………. 347,000
Indirect materials……………………………………………….… 78,000
Indirect labor………………………………………….…….….…. 143,500
Sales commissions……………………………………………….. 150,000
Factory depreciation……………………………………….….… 260,000
Property taxes, factory………………………………………….. 35,000
Factory utilities……………………………………………………. 65,000
Advertising………………………………………………….….….. 62,500
Factory supervision……………………………..….….….….… 185,000
a. Calculate the predetermined overhead rate and calculate the overhead applied during the
year.
b. Determine the amount of over- or underapplied overhead and prepare the journal entry to
eliminate the over- or underapplied overhead assuming that it is not material in amount.
181. A ________ accounting system records production activities using a perpetual inventory
system.
182. _______________________, or customized production, produces products in response
to customer orders.
183. A ______________________ is a separate record maintained for each job.
184. The collection of job cost sheets for all jobs in process makes up the subsidiary ledger
controlled by the _____________________ inventory.
185. In a job order costing system, raw materials requisitioned as direct materials are debited
to __________________; indirect materials are debited to ________________.
186. When factory payroll is assigned to specific jobs, ______________________ is debited.
187. When factory payroll for indirect labor is assigned, __________________ is debited.
188. A __________ is calculated by relating total estimated factory overhead to an allocation
factor such as total estimated direct labor cost, and is used to allocate factory overhead to
specific jobs.
189. When the actual overhead incurred during an accounting period is more than the
overhead applied to jobs, the overhead is said to be ___________________________.
190. Immaterial amounts of overapplied overhead should be _____________ to the
_____________________ account when closed.