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Exam 7: Job Costing

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Question 21

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The predetermined overhead rate is computed by dividing the estimated activity of the allocation base into the estimated manufacturing overhead costs.

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Question 22

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Service organizations generally use the same job costing procedures as manufacturers.

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Question 23

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Reyes Corporation applies overhead using a normal costing approach based upon machine-hours.Budgeted factory overhead was $266,400,budgeted machine-hours were 18,500.Actual factory overhead was $287,920,actual machine-hours were 19,050.How much overhead would be applied to production?

Which of the following approaches allocates overhead by multiplying a predetermined rate × standard activity?

In a traditional job order costing system,the issue of indirect materials to a production department increases: (CPA adapted)

It is possible that the total cost of a job started in April and completed in May will not include:

ProBuild Contractors sells to government agencies using a cost-plus contract and to pri­vate firms using fixed price contracts.What choices does ProBuild have in the design of its job costing system that affect the cost of the government jobs?

Fortune Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs.The cost records for October will show: $\begin{array} { | l | c | } \hline \text { On October 1, the estimates for the month were: } & \\\hline \text { Manufacturing overhead } & \$ 17,000 \\\hline \text { Direct labor-hours } & 13,600 \\\hline \text { During october, the actual results were: } & \\\hline \text { Manufacturing overhead } & \$ 18,500 \\\hline \text { Direct labor-hours } & 12,000 \\\hline\end{array}$

The following selected data were taken from the books of the Owens O-Rings Company.The company uses job costing to account for manufacturing costs.The data relate to April operations.A) Materials and supplies were requisitioned from the stores clerk as follows: Job 405,material X,$7,000.Job 406,material X,$3,000;material Y,$6,000.Job 407,material X,$7,000;material Y,$3,200.For general factory use: materials A,B,and C,$2,300.B) Time tickets for the month were chargeable as follows: C. Other information: Factory paychecks for $36,700 were issued during the month.Various factory overhead charges of $19,400 were incurred on account.Depreciation of factory equipment for the month was $5,400.Factory overhead was applied to jobs at the rate of $3.50 per direct labor hour.Job orders completed during the month: Job 405 and Job 406.Selling and administrative costs were $2,100.Factory overhead is closed out only at the end of the year.The balance in the factory overhead account would represent the fact that overhead was: $\begin{array} { | l | r | l | } \hline \text { Job 405 } & \$ 11,000 & 3,000 \text { hours } \\\hline \text { Job 406 } & \$ 14,000 & 3,600 \text { hours } \\\hline \text { Job 407 } & \$ 8,000 & 1,900 \text { hours } \\\hline \text { Indirect labor } & \$ 3,700 & \\\hline\end{array}$

During April,Orbitz Corporation incurred $64,000 of actual Manufacturing Overhead costs.During the same period,the Manufacturing Overhead applied to Work-in-Process was $66,000. Required: Prepare journal entries to record the incurrence of manufacturing overhead and the application of manufacturing overhead to Work-in-Process.

The predetermined overhead rate for manufacturing overhead for 2016 is $4.00 per direct labor hour.Employees are expected to earn $5.00 per hour and the company is planning on paying its employees $100,000 during the year.However,only 75% of the employees are classified as "direct labor." What was the estimated manufacturing overhead for 2016?

Hsu Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year.At the beginning of the most recently completed year,the company estimated the labor-hours for the upcoming year at 32,000 labor-hours.The estimated variable manufacturing overhead was $7.17 per labor-hour and the estimated total fixed manufacturing overhead was $584,320.The actual labor-hours for the year turned out to be 33,300 labor-hours.Required: Compute the company's predetermined overhead rate for the recently completed year.

Job cost sheets are used in accounting systems as a subsidiary ledger for the Work-in-Process account.

Job 5432 was recently completed.The following data have been recorded on its job cost sheet: $\begin{array} { | l | r | } \hline \text { Direct materials } & \$ 40,610 \\\hline \text { Direct labor-hours } & 1,147 \mathrm { DLHs } \\\hline \text { Direct labor wage rate } & \$ 11 \text { per } \mathrm { DLH } \\\hline \text { Number of units completed } & 3,100 \text { units } \\\hline\end{array}$ The company applies manufacturing overhead on the basis of direct labor-hours.The predetermined overhead rate is $20 per direct labor-hour.Required: Compute the unit product cost that would appear on the job cost sheet for Job 5432.

Delgato Corporation,a manufacturing company,has provided data concerning its operations for September.The beginning balance in the raw materials account was $37,000 and the ending balance was $29,000.Raw materials purchases during the month totaled $57,000.Manufacturing overhead cost incurred during the month was $102,000,of which $2,000 consisted of raw materials classified as indirect materials.The direct materials cost for November was:

What are the transfers-out from the Finished Goods Inventory called?

The Work-in-Process Inventory account of a manufacturing firm has a balance of $2,400 at the end of an accounting period.The job cost sheets of two uncompleted jobs show charges of $400 and $200 for materials used,and charges of $300 and $500 for direct labor used.Overhead is applied as a percentage of direct labor costs.The predetermined rate is:

The financial records for the Harrison Manufacturing Company have been destroyed in a fire.The following information has been obtained from a separate set of books maintained by the cost accountant.The cost accountant now asks for your assistance in computing the missing amounts.What is the value of the beginning Finished Goods Inventory?

The Falcon Company does not maintain backup documents for its computer files.In June,some of the current data were lost,and you have been asked to help reconstruct the data.The following beginning balances on June 1 are known: Reviewing old documents and interviewing selected employees have generated the following additional information: The production superintendent's job cost sheets indicated that materials of $2,600 were included in the June 30 Work-in-Process Inventory.Also,300 direct labor-hours had been paid at $6.00 per hour for the jobs in process on June 30.The Accounts Payable account is only for direct material purchases.The clerk remembers clearly that the balance in the Accounts Payable on June 30 was $8,000.An analysis of canceled checks indicated payments of $40,000 were made to suppliers during June.Payroll records indicate that 5,200 direct labor-hours were recorded for June.It was verified that there were no variations in pay rates among employees during June.Records at the warehouse indicate that the Finished Goods Inventory totaled $16,000 on June 30.Another record kept manually indicates that the Cost of Goods Sold in June totaled $84,000.The predetermined overhead rate was based on an estimated 60,000 direct labor-hours for the year and an estimated $180,000 in manufacturing overhead costs.What document is used to determine the actual amount of direct labor to record on a job cost sheet? $\begin{array} { | l | r | } \hline \text { Direct Materials Inventory } & \$ 12,000 \\\hline \text { Work-ir-Process Inventory } & 4,500 \\\hline \text { Finished Goods Inventory } & 11,000 \\\hline \text { Manufacturing Overhead Control } & 16,500 \\\hline \text { Accounts Payable } & 6,000 \\\hline\end{array}$

Kid's World Manufacturing Company is a manufacturer of furnishings for infants and children.The company uses job costing and employs a full absorption accounting method for cost accumulation.Kid's World Work-in-Process Inventory on April 30 consisted of the following jobs: $\begin{array} { | l | l | r | r | } \hline \text { Job No. } & \text { Items } & \text { Units } & \text { Accumulated Cost } \\\hline \text { CBSI02 } & \text { Cribs } & 20,000 & \$ 900,000 \\\hline \text { PLP086 } & \text { Playpens } & 15,000 & 420,000 \\\hline \text { DRS114 } & \text { Dressers } & 25,000 & 250,000 \\\hline \text { Total } & & & \$ 1,570,000 \\\hline\end{array}$ Kid's World applies manufacturing overhead on the basis of direct labor-hours.The company's estimated manufacturing overhead for the period ending May 31 totals $4,500,000;the company estimated it would use 600,000 direct labor-hours during the year.At the end of April,the balance in Kid's World Materials Inventory,which includes both materials and purchased parts,was $668,000.Additions to,and requisitions from,the materials inventory during the month of May included the following: $\begin{array} { | l | r | r | } \hline & \text { Materials } & \begin{array} { r } \text { Purchased } \\\text { Parts }\end{array} \\\hline \text { Purchased } & \$ 242,000 & \$ 396,000 \\\hline \text { Requisitions: } & & \\\hline \text { Job CBS102 } & 51,000 & 104,000 \\\hline \text { Job PLP086 } & 3,000 & 10,800 \\\hline \text { Job DRS114 } & 124,000 & 87,000 \\\hline \text { Job STR077 } ( 10,000 \text { strollers) } & 62,000 & 81,000 \\\hline \text { Job CRG096 (5,000 } & 65,000 & 187,000 \\\hline \text { carriages) } & & \\\hline\end{array}$ During the month of May,Kid's World factory payroll consisted of the following: $\begin{array} { | l | r | r | } \hline & \text { Hours } & \text { Cost } \\\hline \text { Job CBS102 } & 12,000 & \$ 122,400 \\\hline \text { Job PLP086 } & 4,400 & 43,200 \\\hline \text { Job DRS114 } & 19,500 & 200,500 \\\hline \text { Job STR077 } & 3,500 & 30,000 \\\hline \text { Job CRG096 } & 14,000 & 138,000 \\\hline \text { Indirect supervision } & & 57,600 \\\hline \text { Total } & & \$ 591,700 \\\hline\end{array}$ Listed below are the jobs that were completed and the units that were sold during the month of May. $\begin{array} { | l | l | r | } \hline \text { Job No. } & \text { Items } & \begin{array} { r } \text { Quantity } \\\text { Completed }\end{array} \\\text { CBS102 } & \text { Cribs } & 20,000 \\\hline \text { PLP086 } & \text { Playpens } & 15,000 \\\hline \text { STR077 } & \text { Strollers } & 10,000 \\\hline \text { CRG096 } & \text { Carriages } & 5,000 \\\hline\end{array}$ Required: (a)Compute the value of Kid's World Work-in-Process Inventory on May 31.(b)Compute the value of Kid's World Cost of Goods Manufactured for May.