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Exam 7: Job Costing

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Question 51

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The following are Margin Co.'s production costs for December: What amount of costs should be traced to specific products in the production process? (CPA adapted) $\begin{array} { | l | r | } \hline \text { Direct Material } & \$ 100,000 \\\hline \text { Direct Labor } & 90,000 \\\hline \text { Factory Overhead } & 4,000 \\\hline\end{array}$

A) $194,000.
B) $190,000.
C) $100,000.
D) $90,000.

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Question 52

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The financial records for the Lazer Manufacturing Company have been destroyed in a flood.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. Required: $\begin{array} { | l | r | r | } \hline & \text { Beginning } \$ & \text { Encing } \$ \\\hline \text { Direct materials } & \$ 8,000 & \$ 6,400 \\\hline \text { Work-ir-process } & 7,500 & ? ? ? \\\hline \text { Finished goods } & ? ? ? & 4,200 \\\hline \text { Other information: } & & \\\hline \text { Direct materials used } & \$ 18,000 & \\\hline \text { Direct labor } & 13,500 & \\\hline \text { Overhead applied } & 8,000 & \\\hline \text { Cost of goods manufactured } & 39,500 & \\\hline \text { Cost of goods sold } & 57,000 & \\\hline\end{array}$ Compute the following: (a)Direct materials purchased (b)Ending Work-in-process inventory (c)Beginning Finished goods inventory

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(a)$16,40...

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Question 53

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Reyes Corporation applies overhead using an actual costing approach.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 statements is(are) true regarding the application of manufacturing overhead? (A) Manufacturing overhead is only recorded on the job cost sheets when (a) financial statements are prepared or a job is completed.(B) Overapplied overhead occurs when the actual overhead costs incurred during a period are greater than the overhead costs applied during the period.

Job shops have three types of inventory accounts: Direct Materials,Work-in-Process,and Finished Goods.

Which of the following documents is used as the basis for posting to the direct labor section of the job cost sheet?

Overapplied overhead occurs when the actual overhead costs incurred during a period are greater than the overhead costs applied during the period.

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 ending Work-in-Process inventory balance?

Two jobs were worked on during the year: Job A-101 and Job A-102.The number of direct labor-hours spent on Job A-101 and Job A-102 were 1,200 and 1,000,respectively.The actual manufacturing overhead was $37,000.What was the amount of manufacturing overhead applied to Job A-101? $\begin{array} { | l | r | } \hline \text { Estimated manufacturing overhead for the year } & \$ 30,000 \\\hline \text { Estimated direct labor hours for the year } & 2,000 \\\hline\end{array}$

Music Master Components produces parts for concert hall sound systems.The parts are produced to specification by their customers,who pay either a fixed price (the price does not depend directly on the cost of the job)or price equal to recorded cost plus a fixed fee (cost plus).For the upcoming year (year 2),Music Master expects only two clients (Client 1 and Client 2).The work done for Client 1 will all be done under fixed-price contracts while the work done for Client 2 will all be done under cost-plus contracts.Manufacturing overhead for year 2 is estimated to be $10 million.Other budgeted data for year 2 include: Required: a.Compute the predetermined rate assuming that Music Master Components uses machine-hours to apply overhead.b.Compute the predetermined rate assuming that Music Master Components uses direct labor cost to apply overhead.c.Which allocation base will provide higher income for Music Master Components? d.Is it ethical to choose an allocation method based on which one leads to higher income for the firm?

Which of the following companies would most likely use job costing?

Describe three possible unethical actions that can cause impropriety in job costing and give examples.1)Misstating the stage of completion;2)charging costs to wrong jobs;3)misrepresenting the cost of jobs.

The management of Royal Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year.The company's controller has provided an example to illustrate how this new system would work.In this example,the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 70,000 machine-hours.In addition,capacity is 82,000 machine-hours and the actual activity for the year is 72,900 machine-hours.All of the manufacturing overhead is fixed and is $4,132,800 per year.For simplicity,it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year.Job 706H,which required 300 machine-hours,is one of the jobs worked on during the year.Required: a.Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity.b.Determine how much overhead would be applied to Job 706H if the predetermined overhead rate is based on the amount of the allocation base at capacity.c.Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

Mirror Lake Corporation recorded the following transactions for the just completed month: a.$60,000 in raw materials were purchased on account.b.$51,000 in raw materials were requisitioned for use in production.Of this amount,$42,000 was for direct materials and the remainder was for indirect materials.c.Total labor wages of $92,000 were incurred and paid.Of this amount,$81,000 was for direct labor and the remainder was for indirect labor.d.Additional manufacturing overhead cost of $155,000 were incurred.All were on account.equired: Record the above transactions in journal entries.

Demur Inc. ,a manufacturing company,has provided the following data for the month of April.The balance in the Work-in-Process inventory account was $10,000 at the beginning of the month and $22,000 at the end of the month.During the month,the company incurred direct materials cost of $63,000 and direct labor cost of $39,000.The actual manufacturing overhead cost incurred was $40,000.The manufacturing overhead cost applied to Work-in-Process was $43,000.The cost of goods manufactured for April was:

Wang's Corporation applies overhead based upon machine-hours.Budgeted factory overhead was $325,000 and budgeted machine-hours were 13,000.Actual factory overhead was $312,330 and actual machine-hours were 12,660.Before disposition of over- or underapplied overhead,the cost of goods sold was $725,000 and ending inventories were as follows: $\begin{array} { | l | r | } \hline \text { MIP } & \$ 150,000 \\\hline \text { Finished goods } & \underline { 375,000 } \\\hline \text { Total } & \$ 525,000 \\\hline\end{array}$ Required: a.Compute the amount of overhead applied to production.b.Prepare the journal entry to dispose of the over/under-applied overhead using the write-off to cost of goods sold approach.c.Prepare the journal entry to dispose of the over/under-applied overhead using the proration approach.

Calvin 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 13,000 labor-hours.The estimated variable manufacturing overhead was $2.35 per labor-hour and the estimated total fixed manufacturing overhead was $156,130.Required: Compute the company's predetermined overhead rate.

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.If Job 406 was sold on account for $41,500,how much gross profit would be recognized for the job? $\begin{array} { | l | r | l | } \hline \text { Job 405 } & \$ 11,000 & 3,000 \text { hours } \\\hline \text { Job 406 } & \$ 14,000 & 3,600 \text { hours } \\\hline \text { Job 407 } & \$ 8,000 & 1,900 \text { hours } \\\hline \text { Indirect labor } & \$ 3,700 & \\\hline\end{array}$

It is unethical to intentionally charge costs to the wrong job.

Augusta Test Systems manufactures automated test systems that perform quality inspections during and at the completion of the manufacturing process.As most manufacturing processes are unique,Augusta's test equipment is designed to customer specifications,and each system has a selling price in excess of $300,000.The company uses a job-order cost system based on the full absorption of actual costs and applies overhead on the basis of machine hours using a predetermined overhead rate.For the fiscal year ended November 30 budgeted manufacturing overhead was $1,960,000,and the expected activity level was 98,000 machine hours.Data regarding several jobs at Augusta are presented below.By the end of November all jobs but RX-115 were completed,and all completed jobs had been delivered to customers with the exception of SL-205. $\begin{array} { | r r | r | r | r | } \hline \text { Job No. } & \begin{array} { r } \text { Balance } \\\mathbf { 1 0 8 1 }\end{array} & \begin{array} { r } \text { Direct } \\\text { Materials }\end{array} & \begin{array} { r } \text { Direct } \\\text { Labor }\end{array} & \begin{array} { r } \text { Machine } \\\text { Hous }\end{array} \\\hline \text { XJ-107 } & \$ 118,600 & \$ 4,000 & \$ 8,400 & 150 \\\hline \text { ST-211 } & 121,450 & 2,500 & 12,160 & 300 \\\hline \text { XD-108 } & 21,800 & 86,400 & 36,650 & 3,100 \\\hline \text { SL-205 } & 34,350 & 71,800 & 32,175 & 2,700 \\\hline \text { RX-115 } & & 18,990 & 21,845 & 1,400 \\\hline\end{array}$ Required: (a)Determine the balance in the Finished Goods Inventory on November 30.(b)Compute the cost of goods manufactured for November.(c)Compute the Cost of Goods Sold for November.(d)Determine the balance in Work-In-Process Inventory on November 30.