Problem 19-5B (Continued)
j. The ending balance in Factory Overhead is computed as:
Actual Factory Overhead
Miscellaneous overhead………….. $36,800
SERIAL PROBLEM— SP 19
Serial Problem—SP 19, Business Solutions (40 minutes)
1.The cost of direct materials requisitioned in the month equals the total
direct materials costs accumulated on the three jobs less the amount of
direct materials cost assigned to Job 602 in May:
2.Direct labor cost incurred in the month equals the total direct labor
costs accumulated on the three jobs less the amount of direct labor cost
assigned to Job 602 in May:
Job 602 ………………………………………………………………. $ 800
3.The predetermined overhead rate equals the ratio between the amount
of overhead assigned to the jobs divided by the amount of direct labor
Job 602 Job 604
Overhead……………………………………………………. $ 400 $1,050
4. The cost transferred to finished goods in June equals the total costs of
the two completed jobs for the month, which are Jobs 602 and 603:
Job 602 Job 603 Total
Reporting in Action — BTN 19-1
1. We would anticipate that at least two types of costs will increase as a
percent of sales with Apple’s growth in sales. The first type is broadly
2. Both types of costs identified in part 1 are likely to increase as Apple
increases sales. Examples of specific items include communication,
Achieving success with the first type of costs can be examined by
looking at the relation between operating costs and sales growth.
3. Solution depends on the annual report information obtained.
Comparative Analysis — BTN 19-2
1. Actual inventory changes and operating cash flow effects as found on
the cash flow statement (amounts are in $millions)
Apple Current Year
One Year
Prior
Two Years
Prior
Inventory change………………………..Increase Increase Decrease
Google Current Year
One Year
Prior
Two Years
Prior
Inventory change………………………..Increase Decrease Increase
2. A successful JIT system should reduce inventory levels. This reduction
in inventory should increase operating cash flows. In the solution of
3. This is a one-time occurrence of a release of cash. However, this
one-time adjustment can yield a recurring impact on returns if such
Ethics Challenge — BTN 19-3
Instructor note: This problem is designed to illustrate why the accounting professional
must be aware of management’s and employees’ biases when working with and relying
on accounting estimates and data.
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
Suggested content outline
The obvious concern is that management is allocating more overhead to
government jobs compared to open market bid contracts. There is no
obvious reason for such behavior other than a profit motive.
Specifically, by allocating more overhead to government jobs, profits on
government jobs will increase in relation to cost. Conversely, private
market jobs will show greater profits because more overhead is allocated
to government jobs and less to private jobs.
This type of abuse in overhead allocation is a real problem in practice.
This is why we hear of “$500 hammers” sold to the U.S. Government.
Communicating in Practice — BTN 19-4
Student notes should include but not be limited to the following points:
1. You recommend replacing the general accounting (periodic inventory)
system with a cost accounting (perpetual inventory) system—
specifically a job order cost accounting system. Cost accounting
systems provide product cost information as products are
2. This new system would require use of many different documents to
control the acquisition, use, and availability of materials. It also requires
documents for allocation of labor and overhead costs, and for finished
3. The focal point of the new system is the job cost sheet, which is used to
Taking It to the Net — BTN 19-5
Instructor note: There is no single solution to this assignment.
The Website [amsi.com] provides details about what its job costing
software can provide to users. After careful examination, students can
write a report to the CEO, which may include the following points:
Features of the software (including the tools it offers)
Teamwork in Action — BTN 19-6
1. A medical clinic can be considered as appropriate for a job order cost
accounting system. This is because each patient is unique in many
2. In light of the differences identified in part 1, the doctors will consider
the individual characteristics of every patient in determining the type
Entrepreneurial Decision — BTN 19-7
1. A job cost sheet for a service company would likely not have any costs
2. Examples of direct labor and overhead costs for Middleton Made Knives
include:
Overhead: Allocated portions of general administrative costs such as
Hitting the Road — BTN 19-8
1. The framework for the job cost sheet should follow that in the third
exhibit in the chapter. This includes the descriptions for: company
2. Results of the comparison of job cost sheets to a builder’s actual job
Global Decision — BTN 19-9
1. Actual inventory amounts and changes. Apple’s amounts are in $millions
and Samsung’s amounts are in millions of Korean won.
Apple ($millions)
Balance,
Current Year
Balance,
Prior Year
Change in
Inventory
Inventory……………………………………$1,764 $791 $973 Increase
Samsung (₩millions)
Balance,
Current Year
Balance,
Prior Year
Change in
Inventory
Increase
2. A successful JIT system should reduce inventory levels. This reduction
in inventory should increase operating cash flows. In the solution of
part 1, notice that increases in inventory yield decreases in operating
3. We cannot definitively determine which company of the two would
benefit the most from JIT implementation. The benefit of JIT would