Chapter 07 – Job Costing
7-11
e. $6,000 (underapplied) = $78,000 – $72,000.
f. $96,000.
Sales …………………….…….
$270,000
Cost of Goods Solda .………………………….
$126,000
S&A costs ……………..……………
48,000
174,000
Operating profit …………………………..
$96,000
a The credit from Finished Goods Inventory for $120,000 plus $6,000 underapplied
overhead.
7-22. (25 min.) Assigning Costs to Jobs: Blake Corporation.
a. $447,000, the debit side of the Materials Inventory account.
b. $10,000 overapplied (the difference between overhead control and overhead applied).
c. $25/direct-labor hour (= $250,000 Applied ÷ 10,000 [= $350,000 ÷ $35] Direct Labor
Hours).
BB = EB – TI + TO
Sales …………………….…….
Cost of Goods Solda .………………………….
$809,000
S&A costs ……………..……………
Operating profit …………………………..
7-23. (25 min.) Assigning Costs to Jobs: Pine Ridge Corporation.
a. $190,000, the credit side of the Materials Inventory account.
Chapter 07 – Job Costing
7-12
e.
BB + TI – TO = EB
EB
=
$100,000 + ($190,000 + $187,500 + $150,000) – $345,000
EB
=
$282,500
f.
Sales …………………………..
$600,000
Cost of Goods Solda.………………………….
$256,000
S&A costs ……………..……………
105,000
361,000
Operating profit …………………………..
$239,000
a The credit from Finished Goods Inventory for $251,000 plus $5,000 underapplied
overhead.
7-24. (10 min.) Predetermined Overhead Rates: Tappan, Inc.
Direct material used …………………………………….
$700,000c
Direct labor ………………………………………………..
800,000b
Manufacturing overhead applied …………………..
500,000a
Total manufacturing cost during the year ………..
$2,000,000
Supporting Computations
a Applied manufacturing overhead:
$500,000 = 25% x total manufacturing cost (25% x $2,000,000).
b Direct labor: 62.5% of direct labor equals $500,000, so direct labor was
$800,000 (= $500,000 62.5%).
c Direct material used equals total manufacturing cost less direct labor and manufacturing
overhead applied [$2,000,000 – ($800,000 + $500,000) = $700,000].
7-25. (15 min.) Predetermined Overhead Rates: Mark Corp.
a.
Application rate:
$90,000
= 45% of direct labor
$200,000
Job 301:
$50,000 x .45 =
$22,500
Job 302:
75,000 x .45 =
33,750
Job 303:
100,000 x .45 =
45,000
$101,250
Chapter 07 – Job Costing
7-13
b. $97,000 – $101,250 = $4,250 overapplied manufacturing overhead.
7-26. (10 Min.) Prorate Under- or Overapplied Overhead: Mark Corp.
First, determine the percentage of overhead applied is in each account:
Applied
Overhead
% of Total
Applied
Work in process inventory ……...
$10,125
10%
(= $10,125 ÷ $101,250)
Finished goods ……………………..
30,375
30
(= $30,375 ÷ $101,250)
Cost of goods sold………………...
60,750
60
(= $60,750 ÷ $101,250)
Total ………………………………..
$101,250
100%
Second, allocate the overapplied overhead to each account and record as follows:
Applied manufacturing overhead …………………………....
$101,250
Work-in-process inventory (10% x $4,250) …
425
Finished goods inventory (30% x $4,250) …..
1,275
Cost of good sold (60% x $4,250) ……………..
2,550
Manufacturing overhead control ……………….
$97,000
7-27. (15 min.) Predetermined Overhead Rates: Aspen Company.
a.
Application rate:
$625,000
= 125% of direct labor
$500,000
Job 2-1: …..…….
$195,000 x 1.25 =
$243,750
Job 2-2: …..…….
325,000 x 1.25 =
406,250
Job 2-3: …..…….
130,000 x 1.25 =
162,500
$812,500
b. $825,000 – $812,500 = $12,500 underapplied manufacturing overhead.
Chapter 07 – Job Costing
7-28. (10 Min.) Prorate Over- or Underapplied Overhead: Aspen Company.
First, determine the percentage of overhead applied in each account:
Applied
Overhead
% of
Total
Applied
Work in process inventory (Job 2-3) ..
$162,500
20%
(= $162,500 ÷ $812,500)
Finished goods (Job 2-2) ……………….
406,250
50
(= $406,250 ÷ $812,500)
Cost of goods sold (Job 2-1) …………..
243,750
30
(= $243,750 ÷ $812,500)
Total …………………………..……………
$812,500
100%
Second, allocate the overapplied overhead to each account and record as follows:
Applied manufacturing overhead ……………………………..
$812,500
Work-in-process inventory (20% x $12,500) ……………..
2,500
Finished goods inventory (50% x $12,500) ……………….
6,250
Cost of good sold (30% x $12,500) ………………………….
3,750
Manufacturing overhead control ………….
$825,000
7-29. (20 min.) Applying Overhead Using a Predetermined Rate: Mary’s
Landscaping.
Since Job No. 3318 is the only job in the account, the ending balance of the account must
equal the total cost of the job. We can find the account’s ending balance using the basic
=
Total cost
=
direct materials + direct labor + factory overhead
$28,700
=
direct materials + $3,375 + $2,700
Chapter 07 – Job Costing
7-15
7-30. (10 min.) Applying Overhead Using a Predetermined Rate: Turco Products.
The ending balance in Work in Process can be determined from the following T-acocunt:
Work-in-process inventory
Balance 9/1
70,200
Direct materials
421,200
832,000
To Finished Goods Inventory
Direct labor
262,600
Overhead applied
315,120
Balance 9/30
237,120*
*
* $237,120 = $70,200 + $421,200 + $262,600 + $315,120 – $832,000
$237,120 = Materials + Direct Labor + Applied overhead for job 9-27;
Materials = $237,120 – $35,100 – ($35,100 x 120%)
= $159,900.
7-31. (10 min.) Calculating Over- or Underapplied Overhead: Tony’s Textiles.
Application rate:
$210,000
= $6.00 per machine hour
35,000 hours
7-32. (25 min.) Job Costing in a Service Organization: Arthur’s Olde Consulting
Corporation.
a. Beginning of month
Direct
Labor
Applied
Overhead
(@60%)
Total
SY–400 …….…………………….
$23,040
+
$13,824
=
$36,864
SY–403 …….…………………….
15,120
+
$9,072
=
$24,192
During month
Beginning
Total
Additional
Direct
Labor
Additional
Applied
Overhead
(@60%)
Total
SY–400 …………..………………
$36,864
+
$25,200
+
$15,120
=
$77,184
SY–403 …………..………………
$24,192
+
$72,000
+
$43,200
=
$139,392
Chapter 07 – Job Costing
b.
Direct
Labor
Applied
Overhead
(@60%)
Total
SY–404 …………………………..
$51,120*
+
$30,672
=
$81,792
*$51,120 = $148,320 – $25,200 – $72,000
c. Overhead applied during month:
SY–400 …………………………..
$ 15,120
SY–403 …………………………..
43,200
SY–404 …………………………..
30,672
Total ……………………….….
$88,992
Under- or overapplied amount = $88,992 applied – $90,000 actual = $1,008 underapplied.
7-33. (30 min.) Job Costing In A Service Organization: RCMP.
a.
Wages Payable
Work in Process
Cost of
Services Billed
600,000a
600,000a
672,000c
672,000c
12,000d
72,000b
Service Overhead Control
Applied Service O.H.
60,000
60,000d
72,000d
72,000b
a$200 per hour x 900 hours for Alberta Company, and $200 per hour x 2,100 hours for
Ontario Corp.
Chapter 07 – Job Costing
Sales revenue ……………………………………….……
$1,200,000
a
Cost of services billed …………………………….……
$672,000
Subtract: Overapplied service overhead …………
12,000
660,000
Gross margin ………………………………………..……
$540,000
Marketing and administration …………………..……
240,000
Operating profit ……………………………………..……
$300,000
a$1,200,000 = 3,000 hours x $400
7-34. (30 min.) Job Costing In A Service Organization: AB.
a.
Wages Payable
Work in Process
Cost of
Services Billed
220,000a
220,000a
264,000c
264,000c
2,000d
44,000b
Service Overhead Control
Applied Service O.H.
42,000
42,000d
44,000d
44,000b
a$200 per hour x 440 hours for Massive Airframes, and $200 per hour x 660 hours for
Gigantic Drydocks.
b$40 per hour x 440 hours for Massive Airframes, and $40 per hour x 660 hours for
Sales revenue ……………………………………….……
Cost of services billed …………………………….……
Subtract: Overapplied service overhead …………
Gross margin ………………………………………..……
Marketing and administration …………………..……
Chapter 07 – Job Costing
Chapter 07 – Job Costing
Solutions to Problems
7-36. (15 min.) Estimate Machine-Hours Worked From Overhead Data: Sydney
Corp.
With $80,000 in fixed costs expected and 20,000 machine hours expected, the
7-37. (25 min.) Estimate Hours Worked From Overhead Data: Valley Corp.
60,450 direct labor-hours were worked. With $234,000 in fixed costs expected and 58,500
direct-labor-hours expected, the application rate for the fixed costs was $4.00 per direct
Chapter 07 – Job Costing
7-20
7-38. (40 min.) Assigning Costs—Missing Data.
(a) $100,000, the other side of the credit to the Accounts Payable—Materials Suppliers
account.
(b) $94,000, From the Materials Inventory account,
$8,000 + $100,000 – $4,300 – $9,700 = $94,000.