Chapter 5 – Job-Order Costing
D.
Job 89: $66,795 × 1.4 = $93,513
Job 91: $94,160 × 1.4 = $131,824
153. Fowler Company is a job-order costing company that produces customized bicycles. During the month of October,
Fowler had three jobs in process, Jobs 3, 4, & 5. By the end of the month all three jobs had been completed, with Job 3
being sold for $435. The following costs belong to each job:
Job 4
Direct materials
$ 75
Direct labor
110
Applied overhead
132
Total
$317
A.
Overhead is applied based on direct labor dollars. What is the overhead rate?
B.
What rate does Fowler use to price its jobs?
C.
What is the gross margin on Job 3?
B.
C.
154. Feline Company uses a normal job-order costing system. Currently, a plantwide overhead rate based on direct labor
is used. Lola Katz, the plant manager, has heard that departmental overhead rates can offer significantly better cost
assignments than a plantwide rate can offer. Some jobs spend most of their time in Department A, while others spend
most of their time in Department B. Feline has the following data for its two departments for the coming year:
Department A
Department B
Expected overhead cost
$75,000
$33,000
Expected direct labor hours
30,000 hrs.
24,000 hrs.
A.
Compute the plantwide overhead rate.
B.
Compute the departmental overhead rates. (Carry out your answers to 3 decimal places.)
C.
Which overhead rate would you recommend and why?
A.
$108,000 / 54,000 = $2 per direct labor hour
B.
Dept. A = $75,000 / 30,000 = $2.50 per direct labor hour
Dept. B = $33,000 / 24,000 = $1.375 per direct labor hour
155. What are the three steps of overhead application?
Calculate the predetermined overhead rate.
Apply overhead to production throughout the year.
Chapter 5 – Job-Order Costing
Reconcile the difference between the total actual overhead incurred during the year and the
156. Jocarro Company has a job costing system. The following items appeared in the Work-in-Process account during
February of the current year:
February 1 balance
Materials placed into production
Direct labor (4,000 hours)
Plantwide overhead applied
Cost of goods manufactured
February 28 balance
Jocarro applies overhead to production on the basis of direct labor hours. Job XX, the only job in process on February 28,
has been charged $10,600 materials cost and has 100 labor hours of direct labor time assigned to it.
Required:
A.
Determine the predetermined plantwide overhead rate for Jocarro Company.
B.
Determine the amounts of materials, direct labor, and plantwide overhead included in the
February 28 work in process.
C.
Determine the amount of materials placed into production during February.
A.
Plantwide overhead rate = $96,000 / 4,000 = $24 per direct labor hour
B.
Costs assigned to Job XX:
Direct labor
* $120,000 / 4,000 = $30 per hour
C.
X + $120,000 + $96,000 + $20,000 − $16,000 = $400,000
X = $180,000
Cost of Goods Manufactured:
Direct Labor
Manufacturing
Plus WIP,
Chapter 5 – Job-Order Costing
Feb. 1
Less WIP,
157. Reed 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 December of the current year:
Job 11
Work-in-process, Dec. 1
$26,000
December production activity:
Materials requisitioned
$4,800
Direct labor cost
3,600
Machine hours
700 hrs.
Labor hours
180 hrs.
Actual manufacturing overhead cost incurred in December 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, prepare the journal entry to move the cost.
D.
If Job 10 was delivered to customers that paid $50,000 cash, prepare the journal entries.
E.
What is the gross margin for Job 10?
F.
What is the cost assigned to ending work in process?
G.
Assuming no beginning finished goods what is the cost assigned to ending finished
goods?
H.
How much was overhead over/underapplied?
A.
$240,000 / 8,000 = $30
B.
WIP, Dec. 1
Matl Req’d
DL cost
OH Applied:
Total
Finished goods
Work in process
Chapter 5 – Job-Order Costing
D.
Record a sale:
Cost of goods sold
Finished goods
Cost of goods sold
Gross margin
Job 11 is still in production = $55,400
G.
Finished goods has one job—Job 12 = $76,200
H.
Actual overhead
Applied overhead
= ($12,000 + $21,000 + $27,000)
Underapplied overhead
158. Ski Company produces various types of snow skis. Estimated overhead for the year was $720,000 and estimated
direct labor hours were 240,000. During the month of June, 17,400 direct labor hours were worked, $50,400 of direct
materials were used and the average wage was $12 per hour. In June, 15,000 pairs of skis were produced.
A.
Calculate the predetermined overhead rate.
B.
Calculate the overhead applied to production for June.
C.
Calculate the unit cost for each pair of skis.
A.
$720,000 / 240,000 = $3 per direct labor hour
B.
C.
$311,400 / 15,000 = $20.76 per pair of skis
DM
DL
OH
159. Wisteria Company provided the following data:
Budgeted overhead
Budgeted direct labor hours
Actual overhead
Actual direct labor hours
A.
What is applied overhead?
B.
What is the overhead variance? Is it overapplied or underapplied?
Chapter 5 – Job-Order Costing
A.
B.
$86,880 − $86,000 = $880 overapplied
160. Budgeted overhead is $60,000, budgeted direct labor hours are 3,000, actual overhead is $64,000, and direct labor
hours are 3,230. Unadjusted cost of goods sold is $135,670.
A.
Calculate the overhead variance.
B.
What is adjusted cost of goods sold?
A.
$64,600 − $64,000 = $600 overapplied
B.
$135,670 − $600 = $135,070
Figure 5-13.
During February, Alexander, Inc., worked on two jobs with the following data:
Job 12
Units in each order
100 units
Units sold
100 units
Materials requisitioned
$ 2,480
Direct labor hours
820 hrs.
Direct labor cost
$12,300
Overhead is assigned on the basis of direct labor hours at a rate of $12. During February, Job 12 was completed and
transferred to finished goods. Job 13 is the only unfinished job at the end of the month.
161. Refer to Figure 5-13.
A.
Calculate the per-unit cost of Job 12.
B.
Calculate the ending balance in the work-in-process account.
A.
Unit cost = ($ 2,480 + $12,300 + $9,840) / 100 = $246.20 per unit
B.
Ending WIP = Job 13 = $1,970 + $17,490 + $13,992 = $33,452
162. Refer to Figure 5-13.
A.
Prepare the journal entries for requisitioning all materials used during the month.
B.
Prepare the journal entries for direct labor for the month. Assume the workers have not
been paid yet.
A.
Work in Process
Raw Materials
B.
Work in Process
Wages Payable
Chapter 5 – Job-Order Costing
163. Refer to Figure 5-13. Prepare the journal entries reflecting the completion and sale on account of Job 12. The selling
price is 160% of cost.
Finished Goods
Work in Process
Cost of Goods Sold
Finished Goods
Accounts Receivable
164. If actual overhead for the year is $33,451 and applied overhead is $32,000, is the overhead variance overapplied or
underapplied? Prepare the journal entry necessary to reconcile overhead. Assume the variance is immaterial.
Cost of Goods Sold
Overhead Control
165. The following information was taken from the job cost sheet for Job 101 for Scott Manufacturing Company:
Date started:
Date completed:
Direct
Date
labor
July 5
July 15
$ 900
July 17
July 22
1,350
August 1
August 21
600
Job 101 was sold on account on August 25 for 160% of its cost.
Required:
A.
Prepare summary journal entries to record the costs incurred for Job 101 in the current
year 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 Scott?
D.
Prepare the journal entries to record the sale of Job 101.
A.
Work in Process
Raw Materials
Work in Process
Wages Payable
Work in Process
Chapter 5 – Job-Order Costing
166. Brady Corporation has estimated overhead to be $250,000 for the year based on an estimated amount of direct labor
hours of 40,000. Actual direct labor hours for the year are 41,500 and actual overhead is $258,900.
Required:
A.) Calculate the predetermined overhead rate.
B.) Calculate how much overhead has been applied.
C.) Calculate the overhead variance.
D.) Assuming that the variance is immaterial, prepare the journal entry to close the variance.
Overhead Control
475
Cost of Goods Sold
475
Figure 5-14
Deluxe Design Company makes custom furniture. On December 1, there were two jobs in process, Job 683, with a cost of
$14,200 and Job 684 with a cost of $23,500. Jobs 685, 686, and 687 were started during the month of December. Data on
costs added during the month are as follows:
Job 683
Job 684
Job 685
Job 686
Job 687
Direct materials
$11,000
$8,000
$31,400
$16,700
$6,000
Direct labor
21,000
6,000
12,300
8,450
2,500
Overhead is applied to production at the rate of 80% of direct labor cost. Job 685 was completed on December 17. Job
684 was completed on December 21 and the client was billed at cost plus 45%. All other jobs remained in process.
167. Refer to Figure 5-14.
Required:
A.) Determine the amount of overhead to apply to each job for the period.
B.) Calculate the cost of work-in–process at the end of the month.
C.) Calculate the cost of finished goods, assuming that finished goods inventory on December 1st was zero.
Overhead Control
Finished Goods
Work in Process
$1,425 / $2,850 = 50% of direct labor costs
Accounts Receivable
Sales (160% × $10,275)
Cost of Goods Sold
Finished Goods
Chapter 5 – Job-Order Costing
168. Refer to Figure 5-14
Required:
A.) The actual overhead for December was $41,100, calculate the variance.
B.) Calculate the sales price for Job #684.
C.) Calculate the adjusted cost of goods sold for the month of December.
D.) If selling and administrative expenses for the month totaled $5,600, what is the company’s operating income for
December?
Chapter 5 – Job-Order Costing
169. Refer to Figure 5-14.
Prepare the journal entries to record the following:
A.) Requisitioning of raw materials
B.) Direct labor costs
C.) Applied overhead
D.) Transfer to finished goods
E.) Sale of finished goods (assume sale was made on account)
F.) Closing underapplied/overapplied variance (all variances are immaterial)
170. Bower Company manufactures a product in a factory that has two producing departments, Cutting and Stitching, and
two support departments, D1 and D2. The activity driver for D1 is number of employees, and the activity driver for D2 is
number of machine hours. The following data pertain to Bower:
Support Departments
Producing Departments
Chapter 5 – Job-Order Costing
Cutting
Direct costs
$130,000
Normal activity:
Number of employees
80
Machine hours
15,000
Required:
A. Calculate the cost assignment ratios to be used under the direct method for departments D1 and D2.
B. Allocate the support department costs to the producing departments by using the direct method.
Cutting = 80 / 250 = 0.32
Stitching = 170 / 250 = 0.68
Cutting = 15,000 / 20,000 = 0.75
Stitching = 5,000 / 20,000 = 0.25
Direct costs
$130,000
D1
D2
$320,950
171. There are two major types of companies: those that use a job-order costing system and those that use process-costing
systems.
A.
Explain the differences between the two types of companies.
B.
List 3 examples of each type of company.
Chapter 5 – Job-Order Costing
172. Consider two costing systems, normal costing and actual costing.
A.
Which costing system do most firms use to assign costs to units of product or service?
What does this costing system include?
B.
What is the other costing system? What does this costing system include?
You Decide
173. You are the senior cost accountant at Adventure Industries and you have been asked to explain to the new staff
accountant how the company keeps track of job costs through source documents. Also you need to inform the staff
accountant how these source documents are important in determining inventory, expense and revenue amounts at the end
of the period.
Match each item with the correct statement below.
a.
actual cost system
b.
job-order costing system
c.
normal cost system
d.
process-costing system
174. An approach that assigns the actual costs of direct materials and direct labor to products but uses a predetermined
rate to assign overhead costs
175. An approach that assigns actual costs of direct materials, direct labor, and overhead to products
176. A costing system in which costs are collected and assigned to units of production for each individual job
Chapter 5 – Job-Order Costing
177. A costing system that accumulates production costs by process or by department for a given period of time
Match each item with the correct statement below.
a.
predetermined overhead rate
b.
plantwide overhead rate
c.
departmental overhead rate
d.
overhead variance
e.
overapplied overhead
f.
underapplied overhead
g.
applied overhead
h.
normal cost of goods sold
178. Overhead assigned to production using predetermined rates
179. An overhead rate computed using estimated data
180. The amount by which actual overhead exceeds applied overhead
181. The difference between actual overhead and applied overhead
182. The amount by which applied overhead exceeds actual overhead
183. A single overhead rate calculated using all estimated overhead for a factory divided by the estimated activity level
across the entire factory
184. Estimated overhead for a single department divided by the estimated activity level for that same department
Match each item with the correct statement below. Answers may be used more than once.
a.
Job-order cost sheet
b.
Time ticket
c.
Materials requisition form
185. The job order number, or name, head this form.
186. This form asks for the type, quantity, and unit price of direct materials.
187. This form is filled out by each employee every day.
Chapter 5 – Job-Order Costing
188. Every time a new job is started this is prepared.
189. This form may be used to maintain proper control over a firm’s inventory of direct materials.
Match the following cost flows with the proper event in a job-costing firm:
a.
completion of job
b.
end of each accounting period
c.
materials are moved from storage into production
d.
product is sold
e.
end of year
190. direct materials, direct labor and applied overhead are totaled to yield manufacturing cost of job
191. the costs of job are transferred from the work-in-process account to finished goods account
192. actual overhead is reconciled with applied overhead
193. cost of materials is removed from materials account and added to work-in– process account
194. costs of product are removed from finished goods and added to cost of goods sold
195. schedule of costs of goods sold is prepared
196. immaterial overhead variance closed to costs of goods sold