136. Figure 5-9
The Omega Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units.
It requires the following:
direct materials
$3,000
direct labor ($10/hr)
1,000
overhead (150% DL$)
1,500
After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.
Refer to Figure 5-9. If the rework is considered abnormal spoilage, what is the cost of job 492?
137. The cost of spoilage is added to a job when it is considered to be
138. What is the most important factor that causes service firms to generally rank lower in customer satisfaction
than manufacturing firms?
139. Compare and contrast perishability and intangibility in an automobile oil lubrication shop and architectural
design firms.
140. Why are unit costs important? Why do full-cost unit costs change from accounting period to accounting
period.
141. Why are firms reluctant to use actual costing? How does normal costing solve the problems?
142. Explain why actual costing systems are rarely used in practice.
143. What are the source documents used in a job-order costing system? How do the source documents relate to
the job cost sheet? How do these documents inform work in process?
144. Sound of Thunder Company has a job costing system. The following items appeared in the Work-in–
Process account during April 2014:
April 1, 2014, balance
$20,000
Materials placed into production
?
Direct labor (4,000 hours)
$120,000
Factory overhead applied
$96,000
Cost of goods manufactured
$400,000
April 30, 2014, balance
$16,000
Sound of Thunder applies overhead to production on the basis of direct labor hours. Job XX, the only job in process on April 30, has been charged
$10,600 materials cost and has 100 labor hours of direct labor time assigned to it.
Required:
a. Determine the predetermined factory overhead rate for Sound of Thunder Company.
b. Determine the amounts of materials, direct labor, and factory overhead included in the
April 30, 2014, work in process.
c. Determine the amount of materials placed into production during April 2014.
materials
$10,600
direct labor (100 ´ $30*)
3,000
factory overhead applied (100 ´ $24)
2,400
145. Matriarch Incorporated uses a job-order costing system and a predetermined overhead rate based on
machine hours.
At the beginning of the year, the company estimated manufacturing overhead for the year would be $240,000
and machine hours would be 8,000.
The following information pertains to November of the current year:
Job 10 Job 11 Job 12 Total
Work-in-process, Nov. 1 $16,000 $26,000 $38,000 $80,000
November production activity:
Materials requisitioned $4,000 $4,800 $7,200 $16,000
Direct labor cost $2,400 $3,600 $4,000 $10,000
Machine hours 400 700 900 2,000
Labor hours 120 180 200 500
Actual manufacturing overhead cost incurred in November was $61,000.
Required:
a. Compute the predetermined overhead application rate.
b. Determine the total cost associated with each job.
c. If jobs 10 and 12 were completed, prepared the journal entry to move the cost.
d. If job 10 was delivered to customers that paid $50,000 cash, prepare the journal
entries.
What is the gross profit for job 10?
e. Assuming no beginning work in process, what is the cost assigned to ending work in
process?
f. Assuming no beginning finished goods what is the cost assigned to ending
finished goods?
g. How much was overhead over/underapplied?
146. Selected account balances of Samaritan Company for 2014 are as follows:
Work in Process
$35,000 Debit
Finished Goods
$65,000 Debit
Cost of Goods Sold
$100,000 Debit
Factory Overhead
$22,000 Debit
Required:
a.
Were factory overhead costs underapplied or overapplied in 2014? Explain.
b.
Prepare the journal entry to dispose of the factory overhead balance assuming the amount is immaterial.
c.
Prepare the journal entry to dispose of the factory overhead balance using the allocation method.
147. Coyote Company had the following selected account balances at the end of 2014:
Work in Process
$120,000
Finished Goods
150,000
Cost of Goods Sold
180,000
Factory Overhead (overapplied)
63,000
Required:
a.
Prepare the journal entry to dispose of the factory overhead balance assuming it is written off to Cost of Goods Sold.
b.
Prepare the journal entry to dispose of the factory overhead balance assuming it is allocated among Work in Process, Finished Goods, and
Cost of Goods Sold based on ending balances.
c.
Which method of disposing of under- or overapplied factory overhead cost is more accurate? Explain.
a.
Factory Overhead
63,000
Cost of Goods Sold
63,000
b.
Factory Overhead
63,000
Work in Process (120/450)
16,800
Finished Goods (150/450)
21,000
Cost of Goods Sold (180/450)
25,200
Cost of Goods Sold is sufficient. If the amount is material, allocating the amount to the
two inventories (WIP and FG) and Cost of Goods Sold is preferable.
a.
Underapplied by $22,000
The actual costs were $22,000 greater than those applied to work-in-process.
b.
Cost of Goods Sold
22,000
Factory Overhead
22,000
c.
Work in Process (35,000/200,000)
3,850
Finished Goods (65,000/200,000)
7,150
Cost of Goods Sold (100,000/200,000)
11,000
Factory Overhead
22,000
148. The following information was taken from the job cost sheet for Job 101 for McDonald Manufacturing
Company:
Date started:
December 5, 2014
Date completed:
January 21, 2015
Direct
Direct
Applied
Factory
Job
Date
Materials
Labor
Overhead
Total
12–05–14
$3,000
12–15–14
$ 900
$450
12–17–14
1,500
12–22–14
1,350
675
01–01–15
1,500
01–21–15
600
300
Job 101 was sold on account on January 25, 2015, for 160 percent of its cost. Factory overhead is applied on the basis of direct labor costs.
Required:
a.
Prepare the journal entries to record the costs incurred for Job 101 in 2014-2015 for direct materials, direct labor, and factory overhead.
b.
Prepare the journal entry to record the completion of Job 101.
c.
What is the predetermined factory overhead rate for McDonald Manufacturing?
d.
Prepare the journal entries to record the sale of Job 101.
a.
6,000
Materials
6,000
2,850
Wages Payable
2,850
1,425
Factory Overhead
1,425
b.
Finished Goods
10,275
Work-in-Process
10,275
c.
$1,425/$2,850 = 50% of direct labor costs
d.
Accounts Receivable
16,440
Sales
16,440
Cost of Goods Sold
10,275
Finished Goods
10,275
149. Stainless Steel Company has two production departments: A and B. Stainless Steel has following budgeted
overhead costs and activity:
Overhead costs Direct labor hours Machine hours
Department A $ 50,000 10,000 5,000
Department B 175,000 5,000 25,000
Total $225,000 15,000 30,000
Production data for job 20 and 21 are given below:
Job 20 Job 21
Dept A Dept B Dept A Dept B
Prime costs $7,000 $12,000 $22,000 $30,000
Direct labor hours 50 5 60 5
Machine hours 10 40 10 50
Job 20 Job 21
Units produced 100 100
Required:
a. Compare the costs per unit of Job 20 if Stainless Steel uses
1. a plantwide rate based on direct labor hours;
2. a plantwide rate based on machine hours;
3. departmental rates with Department A based on direct
labor hours and Department B using machine hours.
(round to 2 decimal places)
b. Why is there such a variation in the cost per unit? Which method provides the best
cost assignment?
150. Salazar Company completed the following transactions with respect to its manufacturing operations during
October 2014:
a.
Materials costing $140,000 and indirect materials costing $16,800 were purchased on account. Assume indirect materials was debited to
materials.
b.
A total of $70,000 of materials was requisitioned to the factory for manufacturing operations conducted during October.
c.
Manufacturing payroll for the month consisted of 2,000 hours of direct labor and 500 hours of indirect labor, both at $14 per hour.
d.
Indirect materials costing $7,000 were requisitioned.
e.
Depreciation on the factory building and equipment was $14,000.
f.
Miscellaneous factory overhead expenses totaled $5,600 for October.
g.
Factory overhead cost was applied to work in process at the rate of 125 percent of direct labor costs.
h.
Units of product with a total manufacturing cost of $84,000 were completed and transferred to the finished goods warehouse.
i.
Finished goods costing $49,000 were sold during October for $77,000 cash.
Required:
Prepare journal entries for each of the transactions that occurred during October 2014.
a.
Materials
156,800
Accounts Payable
156,800
b.
70,000
Materials
70,000
28,000
Factory Overhead (500 ´ $14)
7,000
Wages Payable
35,000
d.
Factory Overhead
7,000
Materials
7,000
e.
Factory Overhead
14,000
Accumulated Depreciation
14,000
Factory Overhead
5,600
Various Accounts
5,600
g.
35,000
Factory Overhead
35,000
h.
Finished Goods
84,000
Work-in-Process
84,000
i.
Cash
77,000
Sales
77,000
Cost of Goods Sold
49,000
Finished Goods Inventory
49,000
151. Lowland Corporation is a job order costing company that uses activity-based costing to apply overhead to
jobs. The following overhead activities were budgeted for the year.
Activity
Cost
Driver
Amount of driver
setups
$ 120,000
number of setups
6,000
purchasing
80,000
number of parts
20,000
other overhead
150,000
direct labor hours
75,000
The following information about the jobs was given for September.
Job 1001
Job 1002
Job 1003
Job 1004
Balance 9/1
$44,900
$60,700
$30,500
0
direct materials
54,000
37,000
25,000
41,000
direct labor
80,000
38,500
43,000
71,000
number of setups
40
10
30
200
number of parts
300
180
400
500
direct labor hours
5,000
2,400
5,200
1,200
By September 30, Jobs 1001 and 1003 were completed and sold. The remaining jobs were still in process.
Required:
1. Calculate the activity rates for each overhead activity.
2. Calculate the cost of each job for September 30.
3. What is the beginning work in process on September 1 and October 1?
4. What is the cost of goods manufactured?
5. What is the cost of goods sold?
6. Draw the T account for work in process. (include all debits and credits) Prepare the Statement of the Cost of Goods Manufactured.
Activity
Cost
Amount of Driver
Activity rate
setups
$ 120,000
6,000
$ 20
purchasing
80,000
20,000
4
other overhead
150,000
75,000
2
Job 1001
Job 1002
Job 1003
Job 1004
Total
Balance 9/1
$44,900
$60,700
$30,500
0
136,100
dm
54,000
37,000
25,000
41,000
157,000
dl
80,000
38,500
43,000
71,000
232,500
# setups $20
( 40) 800
(10) 200
(30) 600
(200) 4,000
5,600
# parts $4
(300) 1,200
(180) 720
(400) 1,600
(500) 2,000
5,520
dlhours $2
(5,000) 10,000
(2,400) 4,800
(5,200) 10,400
(1,200) 2,400
27,600
TOTAL
$190,900
$141,920
$111,100
$120,400
$564,320
