Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 15
988
Problem 15-4B (Continued)
Part 3
GENERAL LEDGER ACCOUNTS
Raw Materials Inventory
(a)
125,000
(b)
80,000
(b)
12,000
Bal.
33,000
Work in Process Inventory
(b)
80,000
(e)
233,000
(b)
12,000
(d)
118,000
(c)
68,000
(c)
16,000
(i)
Bal.
51,000
Finished Goods Inventory
(e)
233,000
(g)
141,000
(g)
141,000
Bal.
92,000
Bal.
141,000
Part 4
Total Job Costs*
(a) Work in Process Inventory
Job 488 …………………………………
$ 41,000
Job 491 …………………………………
Job 490 …………………………………
(c) Cost of Goods Sold
Job 487 …………………………………
Job 489 …………………………………
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 15
989
Problem 15-5B (35 minutes)
Part 1
a. Predetermined overhead rate
b. Overhead costs applied to jobs
Direct
Applied
Job No.
Labor
Overhead (50%)
625 …………………………………
$ 354,000
$177,000
626 …………………………………
627 …………………………………
628 …………………………………
629 …………………………………
630 …………………………………
c. Overapplied or underapplied overhead
Actual overhead cost …………………………...
$725,000
Applied overhead cost ………………………….
Part 2
Dec. 31
Factory Overhead ……………………………………….
11,500
11,500
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 15
Problem 15-6B (30 minutes)
1.
JOB COST SHEET
Customer’s Name
Encinita Company
Job No.
450
Direct Materials
Direct Labor
Overhead
Date
Requisition
Number
Cost
Time
Ticket
Number
Cost
Date
Rate
Cost
#223
$16,000
#1–10
$40,000
June —
70%
$28,000
#224
$25,600
$25,600
$40,000
JOB COST SHEET
Customer’s Name
Fargo Inc.
Job No.
451
Direct Materials
Direct Labor
Overhead
Date
Requisition
Number
Cost
Time
Ticket
Number
Cost
Date
Rate
Cost
#225
$8,000
#11–20
$32,000
June—
70%
$22,400
#226
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 15
991
Problem 15-6B (continued)
MATERIALS LEDGER CARD
Item
Steel
Received
Issued
Balance
Date
Receiving
Report
Units
Unit
Price
Total
Price
Requi–
sition
Units
Unit
Price
Total
Price
Units
Unit
Price
Total
Price
June 1
#223
#225
MATERIALS LEDGER CARD
Item
Wood
Received
Issued
Balance
Date
Receiving
Report
Units
Unit
Price
Total
Price
Requi–
sition
Units
Unit
Price
Total
Price
Units
Unit
Price
Total
Price
June 1
80
#224
90
#226
60
MATERIALS LEDGER CARD
Item
Paint
Received
Issued
Balance
Date
Receiving
Report
Units
Unit
Price
Total
Price
Requi–
sition
Units
Unit
Price
Total
Price
Units
Unit
Price
Total
Price
June 1
44
72
$3,168
32
72
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 15
Problem 15-6B (concluded)
2.
Sales ……………………………………………………………
$290,000
Gross profit ………………………………………………….
3.
Raw Materials Inventory* ………………………………
$41,904
Work in Process Inventory† …………………………..
67,200
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 15
993
SERIAL PROBLEM — SP 15
Serial Problem—Business Solutions (40 minutes)
1. Cost of direct materials used in June equals the total direct materials
costs accumulated on the three jobs less the amount of direct materials
cost assigned to Job 602 in May.
Job 602 ……………………………………………………….
$1,500
$ 900
Job 603 ……………………………………………………….
Job 604 ……………………………………………………….
2. Direct labor cost incurred in June 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
Job 603 ………………………………………………………
Job 604 ………………………………………………………
3. Predetermined overhead rate equals the ratio between the amount of
overhead assigned to the jobs divided by the amount of direct labor cost
assigned to them. Because the rate is assumed constant during the year
Overhead ……………………………………………..
Predetermined overhead rate (Overhead/DL)
50%
4. Cost transferred to finished goods in June equals the total costs of the
two completed jobs for the month (Jobs 602 and 603).
Job 602
Job 603
Total
Direct materials ………………….
$1,500
$3,300
$4,800
Overhead …………………………...
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 15
Accounting Analysis — AA 15-1
1.
JOB COST SHEET—Apple
Direct labor
$ 21,600
Overhead ($18 x 4,000 hours) …………………………….
2.
PRICE QUOTE—Apple
Total cost ………………………………………………………….
$148,600
Markup ($148,600 x 40%) ……………………………………
Comparative Analysis — AA 15-2
1.
Apple ($ millions)
Current Year
Prior Year
Service revenues ………
$46,291
$39,748
Cost of services ………..
15,592
$29,505
$24,156
Gross profit ratio ………
Google ($ millions)
Current Year
Prior Year
Service revenues ………
$134,811
$116,461
Cost of services ………..
2. The change in Apple’s current-year gross profit ratio is favorable.
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 15
Extended Analysis — AA 15-3
1.
JOB COST SHEET—Samsung
Direct labor
Phone support staff ($11 x 800 hours) ……………..
$ 8,800
Technical specialists ($22 x 1,200 hours) …………
Overhead ($24 x 2,000 hours) …………………………….
2.
PRICE QUOTE—Samsung
Total cost ………………………………………………………….
$ 83,200
Markup ($83,200 x 30%) ……………………………………..
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 15
DISCUSSION QUESTIONS
1. Factory overhead is not identified with specific units (jobs) or batches (job lots).
Therefore, to assign costs, estimates of the relation between factory overhead cost and
2. Several other factors (allocation bases) are possible and reasonable. These factors
often include direct materials costs, direct labor hours, or machine hours.
3. The job cost sheet captures information on cost and quantity of direct material and
4. Balances in these general ledger accounts equal the sums of costs on job cost sheets.
The balance in Work in Process Inventory equals the sum of costs on job cost sheets
5. For direct materials, a debit (increase) to Work in Process Inventory and a credit
6. A receiving report is the source document for recording materials received in both a
7. Time tickets are used to record how much time employees spend on each job. Time
tickets are also used to determine the amount of factory overhead to charge to jobs
when overhead is based on direct labor.
8. Debits (increases) to factory overhead are the recording of actual overhead costs, such
as indirect materials, indirect labor, factory rent, and factory insurance. Credits
9. Assuming that the amount of overapplied or underapplied overhead is immaterial, it is
closed to the Cost of Goods Sold account.
10. This batch should be accounted for as a job lot. Although individual iPhones could be
viewed as individual jobs, the costs of tracking this detailed information would
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 15
997
11. A predetermined factory overhead rate must be calculated for at least two reasons: (1)
Since not all factory overhead costs are known in advance, estimated overhead costs
must be applied to products during the current period. (2) A predetermined rate is
12. Each patient in a hospital can be viewed as a “job.” In this case, a job order cost sheet
would be used to capture the cost of direct materials (supplies, medicine, and so forth),
direct labor, and hospital overhead.
13. Each of the 30 luxury motorcycles will likely be accounted for as an individual job.
Although similar in many respects, each would have custom features that would impact
14. Verizon employees can use job cost sheets to accumulate the costs (e.g. direct
materials, direct labor, and overhead) used on each job. Managers can use this job
15. In cost-plus pricing, companies estimate the total manufacturing cost of a job or job lot
and then add a target markup to compute a target selling price.
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 15
998
Ethics Challenge — BTN 15-1
Instructor note: This problem is designed to illustrate why the accounting professional
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
Suggested content outline
The concern is that management is applying more overhead to government
jobs compared to open market bid contracts for otherwise similar jobs. This
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 15
Communicating in Practice — BTN 15-2
Student notes should include but not be limited to the following points:
1. The four-step overhead process consists of—
i. setting the predetermined overhead rate at the beginning of the period;
ii. applying estimated overhead costs to specific jobs during the period;
iii. recording actual overhead costs during the period; and,
iv. closing overhead at the end of the period.
Predetermined overhead rates are computed by dividing estimated
2. Applied overhead costs are recorded with debits to Work in Process
Inventory and credits to Factory Overhead. Actual overhead costs are
recorded with debits to Factory Overhead and credits to a variety of
3. If actual overhead is greater than applied overhead, overhead is
underapplied. This difference is closed to and increases cost of goods
Wild and Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 15
Teamwork in Action — BTN 15-3
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 ways,
2. In light of the differences identified in part 1, doctors will consider the
individual characteristics of every patient in determining the type and
Entrepreneurial Decision — BTN 15-4
1. A job cost sheet for a service company would likely not contain many
costs for direct materials. Often, service providers simply include
2. Examples of direct labor and overhead costs for Mark Wallace include:
Direct Materials: Wood, electronic components (e.g. tuners, pickups),
tuning pegs, and strings.