Feedback: OH rate = $396,000/$220,000 = 180%
105. Hancock Manufacturing allocates overhead to production on the basis of direct labor
costs. At the beginning of the year, Hancock estimated total overhead of $396,000; materials
of $410,000 and direct labor of $220,000. During the year Hancock 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.
106. Hancock Manufacturing allocates overhead to production on the basis of direct labor
costs. At the beginning of the year, Hancock estimated total overhead of $396,000; materials
of $410,000 and direct labor of $220,000. During the year Hancock 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.
107. Using the following accounts and an overhead rate of 130% of direct labor cost, compute
the amount of applied overhead.
Goods in Process Inventory Finished Goods Inventory
Beg. Bal. 35,200 Beg. Bal. 5,200
D.M. 55,300 203,300
D.L. ?
O.H. ?F. G. 203,300
End. Bal. 25,200
A. $ 78,000.
B. $ 60,000.
C. $138,000.
D. $ 71,890.
E. $ 90,500.
108. Docksider Boats uses a job order cost accounting system. During one month Docksider
purchased $153,000 of raw materials on credit; issued materials to production of $164,000 of
which $24,000 were indirect. Docksider incurred a factory payroll of $95,000, paid in cash, of
which $25,000 is classified as indirect labor. Docksider uses a predetermined overhead
application 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 Goods in Process Inventory $140,000; debit Factory Overhead $24,000; credit Raw
Materials Inventory $164,000.
C. Debit Raw Materials Inventory $195,000; credit Goods in Process Inventory $195,000.
D. Debit Goods 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.
109. Docksider Boats uses a job order cost accounting system. During one month Docksider
purchased $153,000 of raw materials on credit; issued materials to production of $164,000 of
which $24,000 were indirect. Docksider incurred a factory payroll of $95,000, paid in cash, of
which $25,000 is classified as indirect labor. Docksider uses a predetermined overhead
application rate of 170% of direct labor cost. The journal entry to record the allocation of
factory payroll to production is:
A. Debit Goods in Process Inventory $95,000; credit Factory Payroll $95,000.
B. Debit Goods in Process Inventory $95,000; credit Cash $95,000.
C. Debit Factory Payroll $95,000; credit Cash $95,000.
D. Debit Goods in Process Inventory $70,000; debit Factory Overhead $25,000; credit
Factory Payroll $95,000.
E. Debit Goods in Process Inventory $70,000; debit Factory Overhead $25,000; credit Cash
$95,000.
110. Docksider Boats uses a job order cost accounting system. During one month Docksider
purchased $153,000 of raw materials on credit; issued materials to production of $164,000 of
which $24,000 were indirect. Docksider incurred a factory payroll of $95,000, paid in cash, of
which $25,000 is classified as indirect labor. Docksider uses a predetermined overhead
application rate of 170% of direct labor cost. The journal entry to record the application of
factory overhead to production is:
A. Debit Goods in Process Inventory $55,800; credit Factory Overhead $55,800.
B. Debit Goods in Process Inventory $161,500; credit Factory Overhead $161,500.
C. Debit Goods in Process Inventory $119,000; credit Factory Overhead $119,000.
D. Debit Factory Overhead $119,000; credit Goods in Process Inventory $119,000.
E. Debit Goods in Process Inventory $95,000; credit Factory Payroll $95,000.
111. Match the following terms to the appropriate definition.
A. General accounting system
B. Time ticket
C. Clock card
D. Materials requisition
E. Underapplied overhead
F. Job order manufacturing
G. Overapplied overhead
H. Job cost sheet
I. Job order cost accounting system
J. Predetermined overhead allocation rate
K. Materials ledger card
_______ 1. The production of products in response to special orders; also called customized
production.
_______ 2. A source document that is used to record the number of hours an employee works
and to determine the total labor cost for each pay period.
_______ 3. The amount by which the overhead applied to jobs in a period with the
predetermined overhead allocation rate exceeds the overhead incurred in a period.
_______ 4. An accounting system for manufacturing activities based on the periodic
inventory system.
_______ 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. A cost accounting system designed to determine the cost of producing each job or
job lot.
_______ 7. A source document that production managers use to request materials 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 both
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 then to determine the amount of direct labor to
charge to the job or the amount of indirect labor to charge to overhead.
_______10. The amount by which overhead incurred in a period exceeds the overhead
applied to jobs with the predetermined overhead allocation rate.
_______11. A separate record maintained for each job in a job order costing system; it shows
direct materials, direct labor, and overhead for each job.
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112. What is a cost accounting system? What are the two basic types of cost accounting
systems?
113. Describe the purpose of a job cost sheet, and explain what information is found on the
job cost sheet.
114. Explain how a service firm, such as an advertising agency, might use job order costing.
115. Describe how materials flow through a job order cost accounting system, and identify the
key documents in the system.
116. Describe the flow of labor costs in a job order costing system, and identify the
documents used in the system.
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117. Describe the use of the Factory Payroll account in a job order cost accounting system.
118. Explain what a predetermined overhead allocation rate is, how it is calculated, and why it
is used.
119. Briefly describe how manufacturing firms dispose of overapplied or underapplied factory
overhead.
Problems
120. The Johnson Manufacturing Company has the following job cost sheets on file. They
represent jobs that have been worked on during March of the current year. This table
summarizes information provided on each sheet:
Number Total Cost Incurred Status of Job
444 $15,050 Finished and delivered
445 $22,400 Finished and delivered
446 $ 7,500 Finished and unsold
447 $ 4,300 Finished and delivered
448 $33,000 Finished and unsold
449 $62,000 Finished and unsold
450 $14,600 Unfinished
451 $22,200 Finished and delivered
452 $ 3,600 Unfinished
453 $ 1,000 Unfinished
(a) What is the cost of goods sold for the month of March?
(b) What is the cost of the goods in process inventory on March 31?
(c) What is the cost of the finished goods inventory on March 31?
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121. The Terrapin Manufacturing Company has the following job cost sheets on file. They
represent jobs that have been worked on during June 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 unsold
962 $ 8,500 Unfinished
963 $11,200 Finished and unsold
(a) What is the cost of the goods in process inventory on June 30?
(b) What is the cost of the finished goods inventory on June 30?
(c) What is the cost of goods sold for the month of June?
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122. Minchoy Corporation uses a job order cost accounting 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____________________
123. The following data relates to the Density 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%
124. Erlander Company uses a job order cost accounting system. On November 1, $15,000 of
direct materials and $3,500 of indirect materials were requisitioned for production. Prepare
the general journal entry to record this requisition.
125. A company that uses a job order cost accounting 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.
126. 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.
127. Plumley Ad Agency contracted with a company to prepare an ad campaign. Plumley
uses a job order costing system. Plumley estimates that the job will take 145 designer hours at
$90 per hour and 85 staff hours at $45 per hour. Plumley 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.
128. BC Company uses a job order cost accounting system. During the month of April, 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) Paid factory payroll for the month totaling $37,700 which includes $8,200 indirect labor.
(d) Assigned the factory payroll to jobs and overhead.
Make the necessary journal entries to record the above transactions and events.
129. PRO, 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 and paid factory labor costs of $250,000 cash; 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.
130. Key Manufacturing 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 Key’s goods 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.
131. Prepare journal entries to record the following transactions and events for April using a
job order cost accounting 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 (paid in cash), 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.
132. A company’s ending inventory of finished goods has a cost of $35,000 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?
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133. The production of one unit of Product BBB used $17.50 of direct materials and $21.00 of
direct labor. The unit sold for $56.00 and was assigned overhead at a rate of 30% of labor
costs. What is the gross profit per unit on its sale?
134. A company uses a job order cost accounting system and applies overhead on the basis of
direct labor cost. A summary of the company’s Goods in Process Inventory account for
December appears below.
Goods 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