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Factory equipment rental…………………… 100,000
(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.
148. 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?
149. Samer Corp. uses a job order cost accounting 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.
Samer Corp.'s predetermined overhead allocation 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.
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150. Marshall Corp. uses a job order cost accounting 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.
151. At the end of June, the job cost sheets for Monson 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?
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152. Wilkes Manufacturing uses a job order cost accounting system that charges overhead to
jobs on the basis of direct material cost. At year-end, the Goods 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 goods 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?
153. Whittier Manufacturing uses a job order cost accounting system that charges overhead to
jobs on the basis of direct labor cost. Whittier 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.
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c. Prepare the adjusting entry to allocate the over- or underapplied overhead assuming the
amount if immaterial.
154. Sail Away takes special orders to manufacture sail boats for high end customers.
Complete the job cost sheets for Sail Away 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. Paid $130,000 for factory wages.
d. 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.
e. 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.
f. Applied overhead to all three jobs. The predetermined overhead rate is 190% of direct labor
cost.
g. Transferred jobs 240 and 242 to Finished Goods Inventory.
h. Sold job 240 for $300,000 for cash.
i. 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
155. The predetermined overhead allocation rate for Millay 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.
Fill in the Blank Questions
156. A ________ accounting system records production activities using a periodic inventory
system. A ________ accounting system records production activities using a perpetual
inventory system.
157. _______________________, or customized production, produces products in response
to customer orders.
158. A pricing method where the customer pays the manufacturer for costs incurred on the job
plus a negotiated amount or rate of profit is known as a _________________________ basis.
159. A ______________________ is a separate record maintained for each job.
160. The collection of job cost sheets for all jobs in process makes up the subsidiary ledger
controlled by the _____________________ inventory.
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161. When a job is finished, its job cost sheet is completed and moved from the jobs in
process file to the ____________________ file.
162. In a job order cost accounting system, raw materials requisitioned as direct materials are
debited to __________________; indirect materials are debited to ________________.
163. When factory payroll is assigned to specific jobs, ______________________ is debited.
164. When factory payroll for indirect labor is assigned, __________________ is debited.
165. 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.
