CHAPTER 4 Job-Order Costing and Overhead Application
E 4-50
1.
Credit
a. Raw Materials
Accounts Payable 29,670
d. Overhead Control
Various Payables 17,880
e. Work in Process
Overhead Control 8,640
Total Direct Labor Hours = $32,400/$18 = 1,800 DLH
Applied Overhead = 1,800 DLH × $4.80 = $8,640
2. Job 58 Job 59 Job 60
Direct materials………………………………
…
$ 9,200 $ 8,900 $ 6,400
Direct labor……………………………………. 14,400 10,800 7,200
Applied overhead……………………………
…
3,840 2,880 1,920
Total cost…………………………………
…
$27,440 $22,580 $15,520
3. Raw Materials:
Journal
Account & ExplanationDate Debit
29,670
8,640
17,880
CHAPTER 4 Job-Order Costing and Overhead Application
E 4-50 (Concluded)
4. Work in Process:
Beginning balance…………………………………………
…
$0
Direct materials………………………………………………
…
24,500
Direct labor……………………………………………………
…
32,400
5. Finished Goods:
Beginning balance…………………………………………
…
$ 25,600
Jobs transferred in:
Job 58……………………………………………….……
…
$27,440
Job 59………………………………………………………
.
22,580 50,020
Jobs sold:
Job 57………………………………………………………
…
$25,600
Job 58……………………………………………….……
…
27,440 (53,040)
Ending balance………………………………………………
…
$ 22,580
E 4-51
1. Allocation ratios for Power based on number of machine hours:
Battery = 7,000/(7,000 + 1,000) = 0.8750
Small Motors = 1,000/(7,000 + 1,000) = 0.1250
2.
General Small
Power Factory Battery Motors
Direct costs………………
…
$ 160,000 $ 430,000 $163,000 $ 84,600
Allocate:
Power…………………
…
(160,000)
—
140,000 20,000
—
Operating DivisionsSupport Departments
…
…
…
CHAPTER 4 Job-Order Costing and Overhead Application
E 4-52
1. Allocation ratios for General Factory based on square footage:
Power = 1,000/(1,000 + 5,000 + 15,000) = 0.0476
Battery = 5,000/(1,000 + 5,000 + 15,000) = 0.2381
Small Motors = 15,000/(1,000 + 5,000 + 15,000) = 0.7143
Allocation ratios for Power based on number of machine hours:
2. Support Departments
General Small
Powe
r
Factory Battery Motors
Direct costs………………
…
$ 160,000 $163,000 $ 84,600
Allocate:
*
Totals for Battery and Small Motors do not add to the total for General Factory due to rounding.
Because all support department cost must be transferred to the producing departments, the
company will just “live with” the increase in cost transferred out.
3. Battery Overhead Rate = $423,293/18,000 DLH = $23.52
$ 430,000
Operating Divisions
CHAPTER 4 Job-Order Costing and Overhead Application
P 4-53
1. Overhead Rate = $789,000/100,000 DLH = $7.89 per DLH
2. Job 741 Job 743 Job 744 Job 745
Balance, July 1……
…
$ 29,870 $27,880 $ 0 $ 0
Direct materials…… 25,500 14,450 13,600 8,420
Direct labor………… 61,300 28,700 24,500 21,300
Applied overhead…
…
31,560 15,622 12,624 11,046
Total cost………
…
$148,230 $86,652 $50,724 $40,766
= $234,882
P 4-54
1. Cost of Alban job:
Professional time (85 hours × $120)……………………………
…
$10,200
Mileage (510 miles @ $0.50)………………………………………
…
255
Photographs…………………………………………………………
…
120
Total………………………………………………………………
…
$10,575
2. Overhead is included in the rate for professional time. This is easier for
PROBLEMS
Job 742
$ 55,215
39,800
48,500
26,826
$170,341
P 4-54 (Concluded)
3. Answers may vary. The following is one example.
Beginning Ending Total
Date Client Mileage Mileage Miles
7/8 Alban 56,780 56,815 Ofc. to claimant #1, 35
to Dr. Phony, to
claimant #2, to ofc.
7/9 Alban 56,815 56,903 Ofc. to claimant #3, 88
Rex Spade Mileage Log
Destination
CHAPTER 4 Job-Order Costing and Overhead Application
P 4-55
1. Overhead Rate = $374/$440 = 0.8500 times direct labor cos
t
(This rate was calculated using information from the Carter job; however, the
Pelham and Tillson jobs would give the same answer.)
2. Carte
r
Pelham Tillson Jaspe
r
Dashell
Beginning WIP……
…
$1,024 $1,910 $3,621 $ 0 $ 0
3. Since the Tillson and Jasper jobs were completed, the others must still be in
process. Therefore, the ending balance in Work in Process is the sum of the costs
of the Carter, Pelham, and Dashell jobs.
Carter………………………………
…
$2,179
Pelham……………………………
…
2,830
Dashell……………………………
…
634
Ending work in process……
…
$5,643
Cost of Goods Sold = Tillson Job + Jasper Job = $4,835 + $6,195 = $11,030
4.
Sales (1.30 × $11,030)……………………………………………………………
…
$14,339
Pavlovich Prosthetics Company
Income Statement
For the Month Ended January 31
CHAPTER 4 Job-Order Costing and Overhead Application
P 4-56
1. OH Rate = $108,000/18,000 mhrs = $6.00 per machine hou
r
2. Department A: $75,000/10,000 mhrs = $7.500 per machine hou
r
Department B: $33,000/8,000 mhrs = $4.125 per machine hou
r
3.
Plantwide: Plantwide:
70 mhrs × $6.00 = $420 70 mhrs × $6.00 = $420
Department A appears to be more overhead intensive, so jobs spending more
time in Department A ought to receive more overhead. Thus, departmental rates
provide more accuracy.
4. Plantwide rate: $135,000/18,000 mhrs = $7.50
Department B: $60,000/8,000 mhrs = $7.50
Plantwide: Plantwide:
70 mhrs × $7.50 = $525 70 mhrs × $7.50 = $525
Job 73
Job 73 Job 74
Job 74
CHAPTER 4 Job-Order Costing and Overhead Application
P 4-57
1. Overhead Rate = $432,000/8,000 mhrs = $54.00 per machine hou
r
Job 1 Job 2
Direct materials…………………………………………… $ 6,725 $ 9,340
Direct labor……………………………………………….
…
1,800 3,100
2. Welding Overhead Rate = $220,000/5,000 mhrs = $44.00 per machine hou
r
Assembly Overhead Rate = $62,000/10,000 dlhrs = $6.20 direct labor hou
r
Finishing Overhead Rate = $150,000/2,000 mhrs = $75.00 per machine hou
r
Job 1 Job 2
Direct materials……………………………………………
…
$ 6,725 $ 9,340
Direct labor………………………………………………… 1,800 3,100
…
P 4-58
1. Jan’s Job Ed’s Job
Materials……………………………………………….…………
…
$50 $75
Direct labor ($6 × 10 hours; $6 × 20 hours)………………… 60 120
Applied overhead:
2. Since Jan’s job is more like the jobs Steve is used to doing, her costs are likely
P 4-59
1. Job 64:
Direct materials…………………………………………….……
…
Direct labor…………………………………………….…………
Overhead ($11 × 410 DLH)……………………………………
…
Total cost…………………………………………….………
…
2. Ending Work in Process = Cost of Job 65
= $785 + $9,328 + ($11 × 583 DLH) = $16,526
3.
Finished Goods
Work in Process 14,790
14,790
$ 3,560
6,720
4,510
$14,790
Date
Journal
CreditAccount & Explanation Debit
CHAPTER 4 Job-Order Costing and Overhead Application
P 4-60
1.
Debit
a. Raw Materials 4,610
Accounts Payable 4,610
b. Work in Process 4,800
Raw Materials 4,800
2.
Direct materials……………
…
$3,170 Direct materials……………
…
$1,630
Direct labor…………………
…
910 Direct labor…………………
…
1,260
Applied overhead…………
…
403
A
pplied overhead…………
…
558
Total………………………
…
$4,483 Total………………………
…
$3,448
Debit
f. Finished Goods 4,483
Work in Process 4,483
Date Account & Explanation Credit
Journal
Date Account & Explanation Credit
Job 518 Job 519
Journal
CHAPTER 4 Job-Order Costing and Overhead Application
P 4-60 (Concluded)
3.
Direct materials:
Beginning raw materials inventory…………
…
$1,025
Purchases of raw materials…………………
…
4,610
Total raw materials available………………… $5,635
Ending raw materials…………………………
…
835
Raw materials used……………………………
…
$4,800
Direct labor…………………………………..……
…
2,170
P 4-61
1. = Direct Labor Cost × Overhead Rate
= $80,000 × Overhead Rate
= 1.75, or 175% of Direct Labor Cos
t
2. Applied overhead………………………………..…………………… $140,000
Actual overhead………………………………..……………………
…
138,500
Overapplied overhead………………………………..…………
…
$ 1,500
3. Direct materials………………………………………………………
…
$ 40,000
Direct labor……………………………………………………………
…
80,000
…
Nelson Company
Schedule of Cost of Goods Manufactured
For the Month Ended April 30
Overhead Rate
$140,000
Applied Overhead
CHAPTER 4 Job-Order Costing and Overhead Application
P 4-61 (Concluded)
4.
Debit
Overhead Control 1,500
Cost of Goods Sold 1,500
Adjusted Cost of Goods Sold:
$210,000
(1,500)
$208,500
P 4-62
1. Overhead Rate = $129,600/13,500 DLH = $9.60 per direct labor hou
r
3.
Debit
Overhead Control 172,500
Lease Payable 6,800
Accumulated Depreciation 19,340
Wages Payable 90,400
Utilities Payable 14,560
Other Payables 41,400
Work in Process ($9.60 × 18,100 DLH) 173,760
Overhead Control 173,760
5. Normal cost of goods sold………………………………
…
$635,600
Less: Overapplied overhead……………………………… (1,260)
Adjusted cost of goods sold…………………………
…
$634,340
Date Account & Explanation Credit
Journal
Date Account & Explanation Credit
Journal
CHAPTER 4 Job-Order Costing and Overhead Application
P 4-63
1.
Debit
a. Raw Materials 42,630
Accounts Payable 42,630
b. Work in Process 27,000
Raw Materials 27,000
2. Job 703:
Beginning balance, work in process…………………
…
$10,000
Direct materials……………………………………………
…
12,500
Direct labor ($14 × 780 DLH)……………………………
…
10,920
Overhead applied ($10 × 780 DLH)……………………
…
7,800
Total………………………………………………………
…
$41,220
Job 704:
…
…
…
Journal
Date Account & Explanation Credit
CHAPTER 4 Job-Order Costing and Overhead Application
P 4-63 (Concluded)
3.
Debit Credit
f. Finished Goods 41,220
Work in Process 41,220
4. a. Raw Materials:
Beginning balance………………………
…
$ 6,070
Add: Purchases………………………
…
42,630
Less: Materials requisitioned………… (27,000)
Ending balance………………………
…
$ 21,700
…
…
…
c. Finished Goods:
Beginning balance………………………
…
$ 6,240
Add: Jobs completed…………………
…
41,220
Less: Jobs sold…………………………
…
(6,240)
Ending balance………………………
…
$41,220
Journal
Date
A
ccount & Explanation
CHAPTER 4 Job-Order Costing and Overhead Application
P 4-64
1. Direct method:
Proportion of: Laboratory Pathology
Number of samples……………………
…
0.6000 0.4000
Transactions processed………………
…
0.6500 0.3500
2. Delivery
A
ccounting Laboratory Pathology
Transactions……………… 0.0500
—
0.6175 0.3325
Number of samples………
—
—
0.6000 0.4000
Direct costs………………
…
$ 240,000 $ 270,000 $345,000 $456,000
Accounting:
(0.0500 × $270,000)…
…
13,500 (13,500)
(0.6175 × $270,000)…
…
(166,725) 166,725
(0.3325 × $270,000)…
…
(89,775) 89,775
…
…
P 4-65
1. a. Direct method:
Drilling
A
ssembly
Machine hours………………………
…
0.8000 0.2000
Kilowatt-hours………………………… 0.1000 0.9000
Maintenance:
(0.80 × $320,000)…………………
…
$256,000
(0.20 × $320,000)…………………
…
$ 64,000
…
…
CHAPTER 4 Job-Order Costing and Overhead Application
P 4-65 (Concluded)
Drilling: $459,000/30,000 mhrs = $15.30 per machine hou
r
Assembly: $514,000/40,000 DLH = $12.85 per direct labor hou
r
Prime costs………………………………………………
…
$1,817.00
b. Sequential method: Allocate Power first, then Maintenance
Maintenance Power Drilling Assembly
Machine hours……
…
—
0.80 0.20
Kilowatt-hours……… 0.10
0.09 0.81
Direct costs…………
…
$ 320,000 $ 400,000 $163,000 $ 90,000
Power:
(0.10 × $400,000)
…
40,000 (40,000)
…
…
Maintenance:
(0.80 × $360,000)
…
(288,000)
—
288,000
(0.20 × $360,000)
…
(72,000) 72,000
Total…………………
…
$ 0$ 0 $487,000 $486,000
Drilling: $487,000/30,000 mhrs = $16.23 per machine hou
r
Assembly: $486,000/40,000 DLH = $12.15 per direct labor hou
r
…
2. The sequential method is the more accurate because it considers some of the
support department interactions.
CHAPTER 4 Job-Order Costing and Overhead Application
Case 4-66
1. Mrs. Lucky won’t like being charged more for one job when the same number
and type of announcements were produced in each job.
2. May: Actual Rate = $20,000/500 hours = $40 per hou
r
3. Predetermined Rate = $240,000/(500 hours × 12) = $40 per hou
r
Cost and price of each job:
Direct materials……………………
…
Direct labor…………………………
…
Overhead (5 hours × $40)…………
Total cost………………………
…
Plus 25% markup…………………
…
Price………………………………
…
CASES
$593.75
$250.00
25.00
200.00
$475.00
118.75
CHAPTER 4 Job-Order Costing and Overhead Application
Case 4-67
1. The solution Doug proposes is not ethical. Although maintaining the current
plantwide rate is probably not illegal, its continuation has one purpose: to extract
extra profits from government business. Doug knows the plantwide rate is not
accurately assigning overhead costs to the various jobs and is willing to alter the
assignments on an “unofficial basis” for purposes of bidding on private-sector
jobs. Fundamentally, ethical behavior is concerned with choosing right over
wrong. To knowingly overcharge the government for future business certainly
2. Tonya should first determine whether or not Gunderson has a corporate code of
conduct. She can pursue the avenues suggested by the code. For example, if
Tonya cannot persuade Doug to refrain from implementing his scheme, she