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138. The following cost data relate to the manufacturing activities of Newberry Company
during the just completed year:
The company uses a predetermined overhead rate to apply manufacturing overhead cost to
production. The predetermined overhead rate for the year was $15 per machine-hour. A total of
23,000 machine-hours were recorded for the year.
Required:
a. Compute the amount of underapplied or overapplied overhead cost for the year.
b. Prepare a Schedule of Cost of Goods Manufactured for the year.
139. Job 434 was recently completed. The following data have been recorded on its job cost
sheet:
The company applies manufacturing overhead on the basis of machine-hours. The predetermined
overhead rate is $12 per machine-hour.
Required:
Compute the unit product cost that would appear on the job cost sheet for this job.
140. Job 599 was recently completed. The following data have been recorded on its job cost
sheet:
The company applies manufacturing overhead on the basis of direct labor-hours. The
predetermined overhead rate is $20 per direct labor–hour.
Required:
Compute the unit product cost that would appear on the job cost sheet for this job.
141. Why might a company use a predetermined rate for applying overhead rather than just
apply actual overhead?
142. Describe the difference between normal costing, actual costing, and standard costing.
143. How does job costing for a service organization differ from job costing for a
manufacturer?
144. Describe three possible unethical actions that can cause impropriety in job costing.
1) Misstating the stage of completion; 2) charging costs to wrong jobs; 3) misrepresenting the
cost of jobs.
145. Describe two alternative approaches to the handling of Over- or underapplied overhead.
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146. Alam Company is a manufacturing firm that uses job-order costing. At the beginning of the
year, the company’s inventory balances were as follows:
The company applies overhead to jobs using a predetermined overhead rate based on machine–
hours. At the beginning of the year, the company estimated that it would work 45,000 machine–
hours and incur $180,000 in manufacturing overhead cost. The following transactions were
recorded for the year:
a. Raw materials were purchased, $416,000.
b. Raw materials were requisitioned for use in production, $420,000 ($380,000 direct and $40,000
indirect).
c. The following employee costs were incurred: direct labor, $414,000; indirect labor, $60,000; and
administrative salaries, $212,000.
d. Selling costs, $141,000.
e. Factory utility costs, $20,000.
f. Depreciation for the year was $81,000 of which $73,000 is related to factory operations and
$8,000 is related to selling, general, and administrative activities.
g. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 48,000
machine-hours.
h. The cost of goods manufactured for the year was $1,004,000.
i. Sales for the year totaled $1,416,000 and the costs on the job cost sheets of the goods that
were sold totaled $989,000.
j. The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold.
Required:
Prepare the appropriate journal entry for each of the items above (a. through j.). You can assume
that all transactions with employees, customers, and suppliers were conducted in cash.
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147. Babb Company is a manufacturing firm that uses job-order costing. The company’s
inventory balances were as follows at the beginning and end of the year:
The company applies overhead to jobs using a predetermined overhead rate based on machine–
hours. At the beginning of the year, the company estimated that it would work 17,000 machine–
hours and incur $272,000 in manufacturing overhead cost. The following transactions were
recorded for the year:
• Raw materials were purchased, $416,000.
• Raw materials were requisitioned for use in production, $412,000 ($376,000 direct and $36,000
indirect).
• The following employee costs were incurred: direct labor, $330,000; indirect labor, $69,000; and
administrative salaries, $157,000.
• Selling costs, $113,000.
• Factory utility costs, $29,000.
• Depreciation for the year was $121,000 of which $114,000 is related to factory operations and
$7,000 is related to selling, general, and administrative activities.
• Manufacturing overhead was applied to jobs. The actual level of activity for the year was 15,000
machine-hours.
• Sales for the year totaled $1,282,000.
Required:
a. Prepare a schedule of cost of goods manufactured in good form.
b. Was the overhead underapplied or overapplied? By how much?
c. Prepare an income statement for the year in good form. The company closes any underapplied
or overapplied overhead to Cost of Goods Sold.
