Actual overhead
Applied overhead
Underapplied overhead
12. 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
$3 17,400 = $52,200
C.
$311,400/15,000 = $20.76 per pair of skis
Total
13. Wisteria Company provided the following data:
Budgeted overhead
$80,000
Budgeted direct labor hours
10,000
Actual overhead
$86,000
Actual direct labor hours
10,860
A.
What is applied overhead?
B.
What is the overhead variance? Is it overapplied or underapplied?
$8 10,860 = $86,880.
$86,880 − $86,000 = $880 overapplied
14. 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?
$135,670 − $600 = $135,070
15. Refer to Figure 5-13.
A.
Calculate the per-unit cost of Job 12.
B.
Calculate the ending balance in the work-in-process account.
A.
Unit cost = ($ 2,480 + $12,300 + $9,840)/100 = $246.20 per unit
B.
Ending WIP = Job 13 = $1,970 + $17,490 + $13,992 = $33,452
16. 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.
17. 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.
18. 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.
19. The following information was taken from the job cost sheet for Job 101 for Scott Manufacturing
Company:
Date started:
July 5
Date completed:
August 21
Direct
Direct
Factory
Job
Date
materials
labor
overhead
Total
July 5
$3,000
July 15
$ 900
$450
July 17
1,500
July 22
1,350
675
August 1
1,500
August 21
600
300
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.
Work in Process
Raw Materials
Work in Process
Wages Payable
Work in Process
Overhead Control
Finished Goods
10,275
Work in Process
10,275
$1,425/$2,850 = 50% of direct labor costs
Accounts Receivable
16,440
Sales
16,440
Cost of Goods Sold
10,275
Finished Goods
20. 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
Cost of Goods Sold
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.
21. 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.
22. 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?
23. 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)
24. 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
D1
D2
Cutting
Stitching
Direct costs
$210,000
$165,000
$130,000
$78,500
Normal activity:
Number of employees
–
40
80
170
Machine hours
800
–
15,000
5,000
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.
A
Work in Process
$73,100
$73,100
B
Work in Process
$50,250
$50,250
C
Work in Process
$40,200
$40,200
D
Finished Goods
$95,840
$95,840
E
Cost of Goods Sold
$42,300
$42,300
E
Accounts Receivable
$61,335
$61,335
F
Cost of Goods Sold
ESSAY
1. 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.
petroleum, and pharmaceutical and chemical firms.
2. 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?
A.
Most firms use normal costing systems to assign costs to units of product or service.
This system includes actual direct materials, actual direct labor, and applied overhead.
The other costing system is the actual costing system. It includes actual direct
3. 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.
