17,000
(1)
3,000
(5)
Finished Goods Inventory
Beg Bal
16,000
(7)
63,600
End Bal
13,000
Payroll Payable
5,000
Beg Bal
31,000
(4)
Office Salaries Expense
(4)
Accumulated Depreciation (Factory)
Beg Bal
(3)
At the end of the year, the company closes out the balance in the Overhead account to Cost of Goods
Sold.
The applied overhead is
a.
$28,000.
b.
$29,000.
c.
$30,000.
d.
$40,000.
33. The following partially completed T accounts summarize the transactions of Carlton Company for last
year:
Materials Inventory
Beg Bal
5,000
20,000
(2)
(1)
17,000
Work in Process Inventory
Beg Bal
9,000
63,600
(7)
(2)
13,000
(4)
16,000
(6)
29,000
Overhead
(2)
7,000
29,000
(6)
(3)
14,000
(4)
6,000
(5)
3,000
Cost of Goods Sold
Accounts Payable
17,000
(1)
3,000
(5)
Finished Goods Inventory
Beg Bal
16,000
(7)
63,600
End Bal
13,000
Payroll Payable
5,000
Beg Bal
31,000
(4)
Office Salaries Expense
(4)
Accumulated Depreciation (Factory)
Beg Bal
(3)
At the end of the year, the company closes out the balance in the Overhead account to Cost of Goods
Sold.
The cost of direct materials used in production is
a.
$12,000.
b.
$13,000.
c.
$16,000.
d.
$20,000.
34. When a job is completed in a service organization, the job costs are transferred to the
a.
Work in Process Inventory account.
b.
Finished Goods Inventory account.
c.
Cost of Goods Sold account.
d.
Cost of Services account.
35. In cost-plus contracts, the “plus” represents
a.
sales price.
b.
profit, based on the amount of costs incurred.
c.
overapplied overhead costs.
d.
the amount of any cost overruns.
36. Which of the following could not be learned by analyzing job order cost cards?
a.
The balance of Work in Process Inventory at the end of the period
b.
The cost of all jobs done for a particular customer
c.
The completion time of jobs yet to be completed
d.
The type of products ordered by a particular customer
SHORT ANSWER
1. Explain the similarities and differences between job order costing and process costing. Focus on the
characteristics of each type of system.
2. The Work in Process Inventory account for Corbett Company for the month ended June 30 appears
below.
Work in Process Inventory
Beginning Balance
0
Completed
135,800
Direct Materials
38,200
Direct Labor
48,000
Overhead
86,400
Overhead is applied based on direct labor dollars. Direct material costs for the one job remaining in
work in process on June 30 was $12,300.
a. What was the overhead rate used to apply overhead to jobs?
b. Determine the amount of direct labor charged to the one remaining job.
3. Teddy’s To Hug, produces Teddy Bears for heart patients. Last month the company produced 5,000
bears. Using job order costing, determine the product unit cost for one bear based on the following
costs: production facility utilities, $600; depreciation on production equipment, $550; indirect
materials, $450; direct materials, $1,300; indirect labor, $900; direct labor, $2,500; sales commissions,
$3,000; president’s salary, $5,000; insurance on production facility, $700; advertising expense, $600;
rent on production facility, $5,000; rent on sales office, $3,000; and legal expense, $300. Carry your
answer to two decimal places.
ANS:
4. Pretty Pillows, Mfg., manufactures silk throw pillows. Last month the company produced 3,890
pillows. Using job order costing, determine the product unit cost for one pillow based on the following
costs: production facility utilities, $1,600; depreciation on production equipment, $650; indirect
materials, $400; direct materials, $5,300; indirect labor, $1,000; direct labor, $3,500; sales
commissions, $4,000; president’s salary, $8,000; insurance on production facility, $1,000; advertising
expense, $900; rent on production facility, $6,000; rent on sales office, $4,000; and legal expense,
$600. Carry your answer to two decimal places.
5. G. M. Richardson, CPA, entered into a cost-plus contract with Ivey Computer Services for software
installation and Internet interfacing in her accounting practice. The following is Ivey Computer
Services’ job cost card for this job. Ivey’s profit factor is 30 percent of total costs. Complete the
following card, as indicated:
JOB ORDER COST CARD
Ivey Computer Services
Customer:
G.M. Richardson, CPA
Job Order No.:
___________________________________________
Contract Type
Cost-Plus
Type of Service
Software Installation and Internet Interfacing
Date of Completion
July 13, 20xx
Costs Charged to Job
Total Cost
Software Installations Services
Installation labor
$400
Service overhead (b% of installation labor costs)
(a)
Total
$650
Internet Services
Job Costs:
Direct Materials
Direct Labor
Overhead:
Production facility utilities
Depreciation on production equipment
Indirect materials
Indirect labor
Insurance on production facility
Rent on production facility
Total cost
($19,450 / 3,890)
Internet labor
$200
Service overhead (20% of Internet labor costs)
40
Total
$ (c)
Cost Summary to Date
Total Cost
Software Installation Services
$(d)
Internet Services
(e)
Total
$(f)
Profit (30%)
(g)
Contract revenue
$(h)
6. Bear Country produces hand-carved wooden bears and uses a job order costing system. The following
are data on the three jobs worked on in the company’s first month of operations:
Smokey
Rocky
Curious
Number of bears
180
100
80
Direct labor hours worked
400
200
140
Customer:
G.M. Richardson, CPA__________________________
Date of Completion:
July 13, 20xx_________________________________
Costs Charged to Job
Software Installations Services
Internet Services
Cost Summary to Date
Profit (30%)
Contract revenue
Direct materials cost
$4,500
$2,700
$2,000
Direct labor cost
$6,000
$3,000
$2,100
Overhead cost is applied to job orders on the basis of direct labor hours at a predetermined rate of $10
per hour. The Smokey and Rocky bears were completed during the month, and the Curious bears
remained in work in process at the end of the month.
a. Compute the cost transferred to finished goods during the month.
b. Compute the unit cost for a Rocky bear.
7. As related to a job order costing system, answer the following short questions:
a. What is a job order costing system? Identify three kinds of companies that would use such as
system.
b. What is a job order?
c. What is the purpose of a job order cost card? Identify the kinds of information recorded on it.
ANS:
Smokey
Direct materials
Direct labor
Overhead ($10 x 400)
$14,500
Rocky
Direct materials
Direct labor
Overhead ($10 x200)
Cost transferred to finished goods
Rocky:
8. During the first month of the current accounting period, Southern California Company experienced a
devastating loss due to a fire. Many of the accounting records were lost and the company is now trying
to recreate the lost information. Fragments of data found include the following:
1. A portion of the budget indicates that the overhead rate was $10 per direct labor hour.
2. Job 74 was in process and had incurred $9,600 of direct materials and $14,000 of direct labor (1,000
hours). The company has a single hourly wage rate.
3. During the month, 4,500 direct labor hours were worked.
4. Actual overhead costs were $48,000. No indirect materials were used.
5. The Materials Inventory account had a beginning balance of $28,000 and an ending balance of
$18,000.
6. The Finished Goods Inventory account had a beginning balance of $12,000 and an ending balance
of $26,000.
7. The Work in Process Inventory account had a beginning balance of $17,000.
8. The Cost of Goods Sold is $171,000.
Calculate the following amounts:
a. Ending Work in Process Inventory account balance, Job No. 74
b. Cost of goods completed
c. Amount of overhead under- or overapplied.
d. Direct materials used
e. Direct materials purchased
9. Quicker Company uses a job order costing system. On May 1, Quicker Company’s Work in Process
Inventory account shows a beginning balance of $161,000. Production activity for May was as
follows: Materials costing $91,000, along with operating supplies of $18,000, were requisitioned into
production. Quicker Company’s total payroll was $316,000, of which $77,000 was indirect labor.
Overhead is applied at a rate of 120 percent of direct labor cost. Quicker’s Cost of Goods Sold for the
month of May was $692,000. Finished Goods Inventory was $71,500 on May 1 and $84,000 on May
31. (Quicker does not close out overhead accounts until year-end.)
a. Calculate Quicker’s cost of goods completed for May.
b. Calculate Quicker’s work in process ending inventory (May 31).
c. One of the jobs that was started in May, Job 266, was completed in June. Job 266 was 200
special-order lamps. The following costs had been applied to Job 266 as of June 1: direct materials,
$1,400; direct labor, $1,800; overhead, $2,160. In June, $580 in direct materials cost and $900 of
direct labor cost were added to complete Job 266. What was the cost per unit for Job 266? (Show
your computations.)
ANS:
10. Logan Company uses a job order costing system. A predetermined overhead rate of $7 per machine
hour in Department A and 220 percent per direct labor dollar in Department B has been established
based upon the following information at the beginning of the year:
Department A
Department B
Estimated overhead
$40,600
$88,000
Estimated machine hours
5,800
12,500
Estimated direct labor dollars
$40,000
$40,000
Estimated direct labor hours
5,000
3,125
Job 19 for 100 units is started in Department A and completed in Department B. Determine the total
cost of Job 19 and complete the job cost card based on the following information:
Department A
Department B
Direct materials
$800
$950
Direct labor dollars
$490
$180
Direct labor hours
30
12
Machine hours
15
30
Job Order
JOB ORDER COST CARD
Customer:
Batch:
Custom:
Work in process beginning inventory
$161,000
+ Materials used
+ Direct labor
239,000 ($316,000 – $77,000)
Total in work in process
$777,800
– Cost of goods completed
704,500
Job 266:
Beginning
inventory:
Direct materials
Direct labor
Overhead
Added in June:
Direct materials
Direct labor
$7,920 ÷ 200 = $39.60 per unit
Specifications:
Date of Order:
Date of Completion:
Costs Charged to Job
Previous Months
Current Month
Cost Summary
Direct materials
Department A
Department B
Total direct materials
Direct Labor
Department A
Department B
Total direct labor
Overhead
Department A
Department B
Total overhead
Total cost
Units completed
Product unit cost
Customer:
Batch:
Custom:
Specifications:
Date of Order:
Date of Completion:
Direct materials
Department A
Department B
Total direct materials
Direct Labor
Department A 30 hr
Department B 12 hr
Total direct labor
Overhead
Total overhead
Total cost
Product unit cost
11. Taylor Company manufactures guitars and uses a job order costing system with a predetermined
overhead rate of 110 percent per direct labor dollar.
On September 11, 20xx, Those Guys ordered 200 beginner guitars which were completed on October
13, 20xx. The Job Order number is 1031. Complete the job order cost card based on the following
information:
September
October
Direct materials
$1,800
$1,950
Direct labor dollars
$1,500
$1,800
Direct labor hours
100
120
Machine hours
20
30
Job Order
JOB ORDER COST CARD
Customer:
Batch:
Custom:
Specifications:
Date of Order:
Date of Completion:
Costs Charged to Job
Previous Months
Current Month
Cost Summary
Direct materials
Department A
Department B
Total direct materials
Direct Labor
Department A
Department B
Total direct labor
Overhead
Department A
Department B
Total overhead
Total cost
Units completed
Product unit cost
Customer:
Those Guys
Batch:
Custom:
Specifications:
200 Beginner guitars
Date of Order:
9/11/20xx
Date of Completion:
10/13/20xx
Costs Charged to Job
Cost Summary
Direct materials
Direct labor
12. Morgan & Morgan is a small firm that assists clients in the preparation of their tax returns. The firm
has five accountants and five researchers, and it uses job order costing to determine the cost of each
client’s return. The firm is divided into two departments: (1) Preparation and (2) Research & Planning.
Each department has its own overhead application rate. The Preparation Department’s rate is based on
accountant labor costs and Research & Planning is based on the number of research hours. The
following is the company’s estimates for the current year’s operations.
Preparation
Research &
Planning
Accountant hours
8,000
3,000
Research hours
0
3,000
Accountant labor costs
$480,000
$135,000
Materials and supplies
10,000
5,000
Overhead costs
230,400
204,000
Client No. 2006-713 was completed during April of the current year and incurred the following costs
and hours:
Preparation
Research &
Planning
Accountant hours
30
4
Research hours
0
8
Materials and supplies
$ 25
$ 15
Accountant labor costs
1,800
180
a. Compute the overhead rates to be used by both departments.
b. Determine the cost of Client No. 2006-713, by department and in total.
Accountant labor costs
Materials and supplies
Applied overhead
544
Totals
Overhead
(110% of direct labor)
1,650
Total cost
Product unit cost