86. Which of the following accounts is debited when goods are sold?
a.
Finished Goods
b.
Overhead Control
c.
Raw Materials
d.
Cost of Goods Sold
e.
Sales Revenue
87. What account is credited when goods are sold?
a.
Accounts receivable
b.
Cost of Goods Sold
c.
Finished Goods
d.
Raw materials
e.
Work-in-process
88. What type of event would cause two separate journal entries to be made?
a.
Transferring the good to Finished Goods
b.
Applied overhead to production based on direct labor hours
c.
Transferring the goods from Raw Materials to Work-in-Process
d.
Closing overapplied overhead to Cost of Goods Sold
e.
Selling the good
89. When purchasing raw materials on account, what type of accounts would increase?
a.
Assets and equity
b.
Liabilities and expenses
c.
Liabilities and revenues
d.
Assets and liabilities
e.
Assets and expenses
90. When a job costing $5,000 is completed, the following journal entry is made:
a.
Finished Goods 5,000
Cost of Goods Sold 5,000
b.
Cost of Goods Sold 5,000
Finished Goods 5,000
c.
Work-in-Process 5,000
Finished Goods 5,000
d.
Finished Goods 5,000
Work-in-Process 5,000
e.
Cost of Goods Sold 5,000
Sales 5,000
91. On April 9 of the current year, Job XX4 was completed. The job cost sheet showed a total of $4,000 in
direct materials and $6,000 in direct labor at a rate of $20 per direct labor hour. Plantwide overhead is
applied at $30 per direct labor hour. The debit to Finished Goods Inventory to record the completion of
Job XX4 is
a.
$13,000.
b.
$9,000.
c.
$4,000.
d.
$19,000.
92. At the beginning of the year, Fluman Corporation estimates overhead will be $150,000. If the actual
overhead for the year is $152,000 and the applied overhead for the year is $143,000, what is the
journal entry needed to reconcile the overhead variance? Assume that the overhead variance is
immaterial.
a.
Cost of Goods Sold 9,000
Overhead Control 9,000
b.
Overhead Control 9,000
Cost of Goods Sold 9,000
c.
Cost of Goods Sold 7,000
Overhead Control 7,000
d.
Overhead Control 7,000
Cost of Goods Sold 7,000
e.
none of these
Figure 5-11.
Olson Corporation constructs new homes. Assume that Olson uses a job costing system. During May
of the current year, the following transactions occurred:
Olson purchased $4,500 of lumber on account.
Olson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.
Depreciation of $1,500 on equipment used to build new houses was recorded.
A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.
93. Refer to Figure 5-11. The journal entry to record the requisition of lumber for Olson would include a
a.
debit to Work–in-Process of $4,500.
b.
debit to Materials Inventory of $3,750.
c.
credit to Finished Goods of $3,750.
d.
debit to Work-in–Process of $3,750.
94. Refer to Figure 5-11. The journal entry to record labor for Olson would include a
a.
debit to Finished Goods of $750.
b.
debit to Wages Payable of $750.
c.
credit to Finished Goods of $750.
d.
debit to Work-in–Process of $750.
Figure 5-12.
Walter Company uses a job-order costing system to account for product costs. The following
information pertains to the current year:
Materials placed into production
$140,000
Indirect labor
40,000
Direct labor (10,000 hours)
160,000
Depreciation of factory building
60,000
Other plantwide overhead
100,000
Increase in work-in-process inventory
30,000
Plantwide overhead rate is $18 per direct labor hour.
95. Refer to Figure 5-12. What is the total amount credited to Materials Inventory for Walter in the current
year?
a.
$480,000
b.
$170,000
c.
$140,000
d.
$110,000
96. Refer to Figure 5-12. What is the total amount debited to Finished Goods Inventory in the current
year?
a.
$490,000
b.
$510,000
c.
$450,000
d.
$550,000
PROBLEM
1. McElligott Doll Company had the following overhead costs and production for two months. The dolls
are identical to each other.
September
Actual overhead
$12,000
Number of dolls
3,000
A.
What is the overhead cost per doll per month?
B.
What type of costing is McElligott using? What is the main issue with using this type
of costing?
unit overhead cost per doll is $6 (12,000/2,000).
2. Williams Incorporated estimated overhead to be $440,000 and direct labor hours to be 100,000 for the
year. Actual direct labor ended up being 120,000 hours. Actual overhead for the year amounted to
$500,000.
A.
What is the predetermined overhead rate?
B.
What is the applied overhead for the year?
C.
What is the amount of under- or over-applied overhead at the end of the year?
predetermined overhead rate = $440,000/100,000 = $4.40 per direct labor hour
applied overhead = $4.40 120,000 = $528,000
$528,000 − $500,000 = $28,000 over-applied overhead
3. At the beginning of the year Grey Corporation estimated the following:
Assembly Department
Packaging Department
Overhead
$
840,000
$
210,000
Direct labor hours
80,000
4,000
Machine hours
20,000
12,000
Grey uses departmental overhead rates. In the assembly department , overhead is applied on direct
labor hours. In the packaging department, overhead is applied on the basis of machine hours. Actual
data for the month of April are as follows:
Assembly Department
Packaging Department
Overhead
$
42,759
$
20,400
Direct labor hours
4,000
300
Machine hours
1,000
1,200
Required:
A.) Calculate the predetermined overhead rate for the assembly and packaging departments.
B.) Calculate the overhead applied to production in each department for the month of April.
C.) Calculate how much each department’s overhead is overapplied/underapplied.
4. A company has two departments that all goods pass through, machining and assembly. Machining
overhead is applied based on machine hours and assembly overhead is applied based on direct labor
hours. Data on each department is as follows:
Machining
Assembly
Budgeted overhead
$75,000
$40,000
Budgeted direct labor hours
5,000
10,000
Budgeted machine hours
25,000
1,000
Actual overhead
$75,400
$39,200
Actual direct labor hours
5,203
9,980
Actual machine hours
25,040
850
A.
Calculate the overhead rate for each department.
B.
What is each department’s applied overhead?
C.
Calculate each department’s overhead variance. Specify whether it is overapplied or
underapplied.
5. Elf Company produces ornamental trees and uses normal costing. Elf applies overhead based on direct
labor hours. The following data are provided:
Budgeted
Actual
Overhead
$400,000
$392,000
Machine hours
20,000
18,000
Direct labor hours
16,000
17,840
Direct materials cost
$521,000
Direct labor cost
$410,000
Units produced
10,000
A.
Calculate applied overhead.
B.
Calculate the unit cost.
A.
Predetermined OH rate = $400,000/16,000 = $25 per direct labor hour
$25 17,840 = $446,000 applied overhead
B.
Unit cost = ($521,000 + $410,000 + $446,000)/10,000 = $137.70 per ornamental tree
6. Pribil Farm Equipment is a job-order costing manufacturer that uses a plantwide overhead rate based
on direct labor hours. Estimations for the year include $420,000 in overhead and 30,000 direct labor
hours. Pribil worked on five jobs in March. Data are as follows:
Job 89
Job 90
Job 91
Job 92
Job 93
Balance, 3/1
$23,110
$18,240
$ 9,510
$
0
$ 0
Direct materials
13,000
17,210
22,900
15,240
8,210
Direct labor cost
$8,075
$11,500
$16,250
$9,750
$4,860
Direct labor hours
1,615
2,300
3,250
1,950
972
A.
Machining OH rate = $75,000/25,000 = $3 per machine hour
Machining applied OH = $3 25,040 = $75,120
Machining OH variance = $75,400 − $75,120 = $280 underapplied
By March 31, Jobs 89 and 91 were completed and sold. The rest of the jobs remained in process.
A.
Calculate the plantwide overhead rate.
B.
Calculate the Work in Process on March 31.
C.
Calculate the cost of goods sold for March.
D.
Assume Pribil marks up cost by 40%. What is the selling price of Jobs 89 and 91?
7. 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 3
Job 4
Job 5
Direct materials
$ 80
$ 75
$ 85
Direct labor
100
110
95
Applied overhead
120
132
114
Total
$300
$317
$294
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.
$435/$300 = 1.45 Fowler prices its jobs at cost plus 45%.
$420,000/30,000 = $14 per direct labor hour
B.
$79,150 + $52,290 + $26,678 = $158,118
Balance, 3/1
$0
$0
Direct labor cost
Overhead
Total
Job 89: ($23,110 + $13,000 + $8,075) + (1,615 $14) = $66,795
Job 91: ($9,510 + $22,900 + $16,250) + (3,250 $14) = $94,160
Job 89: $66,795 1.4 = $93,513
Job 91: $94,160 1.4 = $131,824
$435 − $300 = $135
8. 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
24,000
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
Dept. B = $33,000/24,000 = $1.375 per direct labor hour
9. What are the three steps of overhead application?
1.
Calculate the predetermined overhead rate.
3.
Reconcile the difference between the total actual overhead incurred during the year and
10. 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
$ 20,000
Materials placed into production
?
Direct labor (4,000 hours)
$120,000
Plantwide overhead applied
$ 96,000
Cost of goods manufactured
$400,000
February 28 balance
$ 16,000
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.
11. 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 10
Job 11
Job 12
Total
Work-in-process, Dec. 1
$16,000
$26,000
$38,000
$80,000
December production activity:
Materials requisitioned
$ 4,000
$ 4,800
$ 7,200
$16,000
A.
Plantwide overhead rate = $96,000/4,000 = $24 per direct labor hour
Costs assigned to Job XX:
Materials
Direct labor (100 $30*)
Plantwide overhead applied (100 $24)
Work in process, February 28
* $120,000/4,000 = $30 per hour
$X + $120,000 + $96,000 + $20,000 − $16,000 = $400,000
X = $180,000
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 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.
Work in process, Dec. 1
Materials requisitioned
$ 4,800
$ 7,200
$16,000
Direct labor cost
Overhead applied:
Machine hours
400 $30
700 $30
Total
C.
Job 10 + Job 12 = $34,400 + $76,200 = $110,600
Finished goods
Work in process
D.
Record a sale
Cash
Sales
$50,000
Cost of goods sold
Finished goods
$34,400
F.
Job 11 is still in production = $55,400
Finished goods has one job − Job 12 = $76,200