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45) Job-cost records for Boucher Company contained the following data:
Total Cost
Date Date Date of Job
Job No. Started Finished Sold at June 30
220 May 18 June 12 June 20 $6,000
221 May 20 June 19 June 21 4,000
222 June 7 July 5 July 12 7,000
223 June 10 June 28 July 1 6,500
224 June 19 July 16 July 25 8,000
Required:
a. Compute WIP inventory at June 30.
b. Compute finished goods inventory at June 30.
c. Compute cost of goods sold for June.
46) Constanza Company has the following balances as of the year ended December 31, 2014:
Direct Materials Inventory $30,000 Dr.
WIP Inventory 69,000 Dr.
Finished Goods Inventory 99,000 Dr.
Underapplied Factory Department Overhead 8,000 Dr.
Cost of Goods Sold 149,000 Dr.
Additional information is as follows:
Cost of direct materials purchased during 2014 $82,000
Cost of direct materials requisitioned in 2014 74,000
Cost of goods completed during 2014 204,000
Factory overhead applied (120% of direct labor) 96,000
Required:
a. Compute beginning direct materials inventory.
b. Compute beginning WIP inventory.
c. Compute beginning finished goods inventory.
d. Compute actual factory overhead incurred.
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47) Cowley County Hospital uses a job-costing system for all patients who have surgery. In March, the
pre-operating room (PRE-OP) and operating room (OR) had budgeted allocation bases of 4,000 nursing
hours and 2,000 nursing hours, respectively. The budgeted nursing overhead charges for each
department for the month were $168,000 and $132,000, respectively. The hospital floor for surgery
patients had budgeted overhead costs of $1,200,000 and 15,000 nursing hours for the month. For patient
Fred Adams, actual hours incurred were eight and four hours, respectively, in the PRE-OP and OR
rooms. He was in the hospital for 4 days (96 hours). Other costs related to Adams were:
PRE-OP OR In-room
Costs Costs Costs
Patient medicine $ 200 $ 500 $2,400
Direct nursing time $1,000 $2,000 $3,000
The hospital uses a budgeted overhead rate for applying overhead to patient stays.
Required:
What is the total cost of the stay of patient Fred Adams?
Patient Fred Adams:
PRE-OP OR In-room Totals
Patient medicine $ 200 $ 500 $2,400 $3,100
Direct nursing time 1,000 2,000 3,000 6,000
Nursing overhead:
PRE-OP ($42 × 8) 336 336
OR ($66 × 4) 264 264
In-room ($80 × 96) 0 0 7,680 7,680
Total $1,536 $2,764 $13,080 $17,380
Diff: 3
Objective: 6
AACSB: Application of knowledge
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48) Marblex manufactures marble statues. In March, the two production departments had budgeted
allocation bases of 4,000 machine-hours in Department X and 8,000 direct manufacturing labor-hours in
Department Y. The budgeted manufacturing overheads for the month were $60,000 and $64,000,
respectively. For Job A, the actual costs incurred in the two departments were as follows:
Department X Department Y
Direct materials purchased on account $110,000 $177,500
Direct materials used 40,000 13,500
Direct manufacturing labor 55,000 53,500
Indirect manufacturing labor 11,000 9,000
Indirect materials used 5,000 4,750
Lease on equipment 16,250 3,750
Utilities 1,000 1,250
Job A incurred 800 machine-hours in Department X and 300 manufacturing labor-hours in Department Y.
The company uses a budgeted overhead rate for applying overhead to production.
Required:
a. Determine the budgeted manufacturing overhead rate for each department.
b. Prepare the necessary journal entries to summarize the March transactions for Department X.
c. What is the total cost of Job A?
49) Explain the procedure how overhead indirect costs become a part of work-in process inventory.
50) Why does the manufacturing overhead control account (debit) need to equal the manufacturing
overhead allocated account (credit)?
51) What are three possible ways to dispose of underallocated or overallocated overhead costs at the end
of a fiscal year? Briefly comment on the theoretical correctness or incorrectness of each method.
1) The spreading of underallocated or overallocated overhead among ending work-in-process, finished
goods, and cost of goods sold is called ________.
A) the adjusted allocation rate approach
B) the proration approach
C) the write-off of cost of goods sold approach
D) the weighted-average cost approach
2) The method that restates all overhead entries in the general ledger and subsidiary ledgers using actual
cost rates rather than budgeted cost rates is called ________.
A) the adjusted allocation rate approach
B) the proration approach
C) the write-off of cost of goods sold approach
D) the weighted-average cost approach
3) When the allocated amount of indirect costs are less than the actual amount, indirect costs have been
________.
A) within budget
B) overallocated
C) underallocated
D) perfectly allocated
4) One reason indirect costs may be overapplied is because ________.
A) the actual allocation base quantity exceeds the budgeted quantity
B) budgeted indirect costs exceed actual indirect costs
C) requisitioned direct materials exceed budgeted material costs
D) Both A and B are correct.
5) The ________ adjusts individual job-cost records to account for underallocated or overallocated
overhead.
A) adjusted allocation-rate
B) proration approach
C) write-off to cost of goods sold approach
D) weighted-average cost approach
6) The adjusted allocation approach yields the benefits of ________.
A) timeliness and convenience of normal costing
B) allocating budgeted manufacturing overhead costs at the end of the year
C) write-off to the cost of goods sold approach
D) the proration approach
7) The approach often used when dealing with small amounts of underallocated or overallocated
overhead is the ________.
A) adjusted allocation-rate approach
B) proration approach
C) write-off to cost of goods sold approach
D) adjusted write-off approach
8) The ________ approach carries the underallocated or overallocated amounts to overhead accounts in
the following year.
A) adjusted allocation-rate
B) proration
C) write-off to cost of goods sold
D) None of these answers are correct.
9) A company would use multiple cost-allocation bases ________.
A) if managers believed the benefits exceeded the additional costs of that costing system
B) because there is more than one way to allocate overhead
C) because this is a simpler approach than using one cost allocation base
D) if managers believe that using multiple cost-allocation bases is the only acceptable method
Filippucci Company used a budgeted indirect-cost rate for its manufacturing operations, the amount
allocated ($200,000) is different from the actual amount incurred ($225,000).
Ending balances in the relevant accounts are:
Work-in-Process $ 10,000
Finished Goods 20,000
Cost of Goods Sold 170,000
10) Under the writeoff approach, the difference between Manufacturing Overhead Control and
Manufacturing Overhead Allocated is adjusted in the ________.
A) Cost of Goods Sold account
B) Work-in Process account
C) Manufacturing Overhead account
D) Miscellaneous Expenses account
11) Which account is credited to write off the difference between allocated and actual overhead using the
proration approach?
A) Work-in Process Control
B) Manufacturing Overhead Allocated
C) Finished Goods Control
D) Manufacturing Overhead Control
12) Legal Advisory Inc., employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirect
costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional
hours. Following is information for 2014:
Budget Actual
Indirect costs $270,000 $300,000
Annual salary of each attorney $100,000 $110,000
Annual salary of each paraprofessional $ 29,000 $ 30,000
Total professional labor-hours 50,000 dlh 60,000 dlh
When using a normal costing system, year-end accounting records will show that indirect costs are
________.
A) perfectly allocated
B) underallocated
C) within budget
D) overallocated
13) Overhead costs allocated each month are expected to equal actual overhead costs incurred each
month.
14) When actual indirect costs exceed allocated indirect costs, indirect costs have been underapplied.
15) One reason indirect costs may be underapplied is if actual indirect costs are less than budgeted
indirect costs.
16) The proration approach to allocating overapplied or underapplied overhead adjusts individual job-
cost records.
17) The manufacturing overhead control accounts are closed or become zero at the end of each year.
18) Under the proration approach, the sum of the amounts shown in the subsidiary ledgers will not
match the amounts shown in the general ledger because no adjustments from budgeted to actual
manufacturing overhead rates are made in the individual job-cost records.
19) The actual costs of all individual overhead categories are recorded in the Manufacturing Overhead
Control account.
20) Proration is the spreading of underallocated or overallocated overhead among ending work in
process, finished goods, and costs of goods sold.
21) It is appropriate for service organizations such as public accounting firms to use job costing.
22) Plastic Products Company manufactures pipes and applies manufacturing costs to production at a
budgeted indirect-cost rate of $12 per direct labor-hour. The following data are obtained from the
accounting records for June 2014:
Direct materials $350,000
Direct labor (16,000 hours @ $11/hour) 176,000
Indirect labor 20,000
Plant facility rent 100,000
Depreciation on plant machinery and equipment 40,000
Sales commissions 50,000
Administrative expenses 60,000
Required:
a. What actual amount of manufacturing overhead costs was incurred during June 2014?
b. What amount of manufacturing overhead was allocated to all jobs during June 2014?
c. For June 2014, was manufacturing overhead underallocated or overallocated? Explain.
