Chapter 07 – Job Costing
7-41
7-49. (continued)
(e)
Overhead applied
=
Ending manufacturing overhead – beginning
manufacturing overhead + overapplied overhead
=
$434,000a – $369,800a + $2,400a
=
$66,600
(f)
Loss
=
=
$408,028
Note: The insurance company may dispute paying the $2,400 overapplied overhead.
aGiven in problem
7-50. (70 min.) Find Missing Data: IYF Corporation.
The calculations are shown below. We usually present these using both T-accounts
and the following formulas.
(a)
Beginning inventory + Transfers in = Ending inventory + Transfers Out
Beginning inventory
=
Ending inventory + Transfers Out – Transfers in
=
$3,000 + $45,000 – $37,000
=
$11,000
(c)
Overhead rate
=
80% (= $8,000 ÷ $10,000)
(d)
Overhead incurred
=
Overhead applied + Underapplied overhead
=
$8,000 + $400
=
$8,400
Chapter 07 – Job Costing
7-42
Work in process beginning = Manufacturing costs – Transfers to finished goods.
We know the amount of direct labor, but not the amount of direct materials
7-51. (70 min.) Find Missing Data: NIC Enterprises.
The calculations are shown below. We usually present these using both T-accounts
and the following formulas.
(a)
Beginning inventory + Transfers in = Ending inventory + Transfers Out
Ending inventory
=
Beginning inventory + Transfers in – Transfers Out
=
$148,000 + $1,520,000 – $1,460,000
=
$208,000
Chapter 07 – Job Costing
7-43
(c)
Overhead rate
=
625% (= $500,000 ÷ $80,000)
(d)
Overhead incurred
=
Overhead applied – Underapplied overhead
=
$500,000 – $10,000
=
$490,000
0.25 x Work in process beginning
= Manufacturing costs – Transfers to finished goods.
0.25 x Work in process beginning = $1,082,000 (direct materials) + $80,000 (direct
Chapter 07 – Job Costing
7-52. (45 min.) Incomplete Data—Job Costing: Chelsea Household
Renovations.
Chapter 07 – Job Costing
7-45
7-52. (continued)
M refers to direct materials
1Labor to complete job is $76,800 since the beginning inventory was 50% complete
2Applied overhead
=
$123,200 – $8,000 – $76,800
=
$38,400
Applied overhead
=
$38,400
$76,800
=
50%
of direct labor dollars
3Overhead in beginning inventory
=
0.50 x $38,400
=
$19,200
4Overhead applied in June
=
0.50 x $38,400
=
$19,200
5Materials for Job No. 62
=
Purchases – materials for Job No. 63
=
$18,400 – $6,400
=
$12,000
6Labor for Job No. 62
=
Total direct labor costs – Labor for Job No. 61 – Labor
for Job No. 63
=
$128,000 – $38,400 – $41,600
=
$48,000
7Overhead for Job No. 62
=
0.50 x $48,000
=
$24,000
8Overhead for Job No. 63
=
0.50 x $41,600
=
$20,800
Chapter 07 – Job Costing
7-46
7-52. (continued)
9Applied Overhead
=
$19,200 + $24,000 + $20,800
=
$64,000
10Underapplied overhead
=
Actual – Applied
=
$80,000 – $64,000
=
$16,000
7-53. (25 min.) Job Costing and Ethics: Old Port Shipyards.
(This problem is based on actual experience.)
a.
Olde Town
Newton
Overhead cost ……………..
$20,000,000
$80,000,000
Direct labor-hours …………
200,000
200,000
Predetermined rate……….
$100 per hour
$400 per hour
(Overhead ÷ Hours) ………
(= $20,000,000 ÷
200,000)
(= $80,000,000 ÷
200,000)
b. The supervisor recognizes that if the government audit agency allows the overhead
7-54. (25 min.) Job Costing and Ethics: Price and Waters.
a. Chuck should refuse to charge the U.S. Department of Defense for work for
Chapter 07 – Job Costing
were paid different amounts. If all are paid the same rate, the two bases will give the
same result.
7-56. (75 min.) Cost Estimation, Estimating Overhead Rates, Job Costing, and
Decision-Making: O’Leary Corporation.
This problem relates overhead allocation to cost estimation and decision making. It
uses some of the methods of Chapters 4 and 5.
Chapter 07 – Job Costing
Manufacturing overhead ….
42,000
(= $140 x 300 hours)
$1,069,500
c. $1,240,000 overapplied.
Overhead applied
$10,360,000
(= $140 x 74,000 hours)
Overhead incurred
9,120,000
(Given)
Overapplied overhead
$1,240,000
7-56. (continued)
d. A variety of allocations can be used. Because we know how many direct labor hours
are in each account from year 3, we will use this basis. Direct labor hours are the
basis for applying overhead. If this were unknown, we could use total account
Direct labor hours, year 3
(Given)
In cost of goods, year 3
(74,000 – 11,840)
Account
Percentage
Allocation
Work in process
10% (= 7,400 ÷ 74,000)
(= .10 x $1,240,000)
Finished goods
6 (= 4,440 ÷ 74,000)
(= .06 x $1,240,000)
Cost of sales
84 (= 62,160 ÷ 74,000)
(= .84 x $1,240,000)
Chapter 07 – Job Costing
7-56. (continued)
e. $567,500.
This is a special order problem similar to those discussed in Chapter 4. The
minimum bid would be the variable cost of the job, ignoring strategic or other