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CAKAKAKAKA

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CHAPTER 4--Job Order Costing

LEARNING OBJECTIVES

LO 1 How do job order and process costing systems as well as their related valuationmethods differ?

LO 2 What constitutes a job! from an accounting standpoint?

LO " What purposes are served by the primary documents used in a job order costingsystem?

LO # What journal entries are used to accumulate costs in a job order costing system?

LO $ How do technological changes impact the gathering and use of information in jobOrder costing systems?

LO % How are standard costs used in a job order costing system?

LO & How does information from a job order costing system support management decisionma'ing?

LO ( How is spoilage treated in a job)order costing system?

QESTION GRI!

True/False

Difficulty Level Learning Objectives

Easy Moderate Difficult LO 1 LO 2 LO 3 LO 4 LO LO ! LO " LO #

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('ort)*ns+er



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,roble%



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TRE"#ALSE

1+ , company that produces sugar will use a job order costing system to trac' production costs+

,-./ 0 0/ 3asy O45/ #)1

2+ , company that produces sugar will use a process costing system to trac' production costs+

,-./ 6 0/ 3asy O45/ #)1

"+ , company that manufactures custom bridal gowns will use a job order costing system to trac' production costs

,-./ 6 0/ 3asy O45/ #)1

#+ , company that manufactures custom bridal gowns will use a process costing system to trac' costs+

,-./ 0 0/ 3asy O45/ #)1

$+ , company that manufactures small 7uantities of identifiable products will use a job order costingsystem

,-./ 6 0/ 3asy O45/ #)1

%+ , company that manufactures small 7uantities of identifiable products will use a process costingsystem

,-./ 0 0/ 3asy O45/ #)1

&+ , company that manufactures large 7uantities of homogenous goods will use a process costing system+

,-./ 6 0/ 3asy O45/ #)1

(+ n an actual job order costing system8 factory overhead is assigned to a job on a periodic basis+

,-./ 6 0/ 3asy O45/ #)1

9+ , company that manufactures large 7uantities of homogenous goods will use a job order costingsystem+

,-./ 0 0/ 3asy O45/ #)1

1*+ ost flows and physical flows of units are identical+

,-./ 0 0/ 3asy O45/ #)1

11+ n an actual job)order costing system8 factory overhead is assigned to a job continuously during the production process+

,-./ 0 0/ 3asy O45/ #)1

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12+ n a normal job order costing system8 actual factory overhead is applied at the end of the period

,-./ 0 0/ 3asy O45/ #)1

1"+ n a normal job order costing system8 factory overhead is applied using actual rates times actual input

,-./ 0 0/ :oderate O45/ #)1

1#+ n a normal job order costing system8 factory overhead is applied using predetermined rates times

actual input+

,-./ 6 0/ 3asy O45/ #)1

1$+ n a normal job order costing system8 factory overhead is applied using predetermined rates timesstandard input

,-./ 0 0/ :oderate O45/ #)1

1%+ n a standard job order costing system8 factory overhead is applied using predetermined rates timesstandard input+

,-./ 6 0/ :oderate O45/ #)1

1&+ n a standard job order costing system8 factory overhead is applied using actual rates times standardinput+

,-./ 0 0/ :oderate O45/ #)1

1(+ n a standard job order costing system8 factory overhead is applied using predetermined rates timesactual input+

,-./ 0 0/ :oderate O45/ #)1

19+ n a job order costing system8 costs are accumulated for each individual job

,-./ 6 0/ 3asy O45/ #)2

2*+ When raw materials are placed into production8 the materials inventory account is debited

,-./ 0 0/ 3asy O45/ #)#

21+ When manufacturing overhead is charged to a job8 the wor' in process account is debited+

,-./ 6 0/ :oderate O45/ #)#

22+ When manufacturing overhead is charged to a job8 the manufacturing overhead account is debited+

,-./ 0 0/ :oderate O45/ #)#

2"+ When manufacturing overhead is charged to a job8 the wor' in process account is credited+

,-./ 0 0/ :oderate O45/ #)#

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2#+ When indirect labor is applied to a job in process8 the manufacturing overhead account is debited+

,-./ 0 0/ 3asy O45/ #)#

2$+ When indirect labor is recorded for a job in process8 the wor' in process account is debited+

,-./ 0 0/ 3asy O45/ #)#

2%+ .tandards can be computed for materials8 labor8 and overhead+

,-./ 6 0/ 3asy O45/ #)#

2&+ .tandards can be used in a job order costing system if the products manufactured are similar in nature+

,-./ 6 0/ 3asy O45/ #)%

2(+ Overapplied factory overhead that is material in amount is closed to cost of good sold at year end+

,-./ 0 0/ 3asy O45/ #)#

29+ Overapplied factory overhead that is immaterial in amount is closed to cost of good sold at year end+

,-./ 6 0/ 3asy O45/ #)#

"*+ Overapplied overhead that is material in amount is allocated between 0inished ;oods nventory8 Wor'in <rocess8 and ost of ;oods .old at year end

,-./ 6 0/ 3asy O45/ #)#

"1+ .tandards can be used in a job order costing system if the products manufactured are varied in nature+

,-./ 0 0/ :oderate O45/ #)%

"2+ f a normal loss is anticipated on a specific job8 the overhead application rate should include an amountfor the cost of defective units less disposal value+

,-./ 6 0/ :oderate O45/ #)(

""+ f a normal loss is anticipated on all jobs8 the overhead application rate should include an amount forthe cost of defective units less disposal value+

,-./ 0 0/ :oderate O45/ #)(

"#+ -ormal spoilage is considered a period cost

,-./ 0 0/ 3asy O45/ #)(

"$+ ,bnormal spoilage is considered a period cost

,-./ 6 0/ 3asy O45/ #)(

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"%+ 6he journal entry to record normal spoilage specifically identified with a particular job includes a debitto Wor' in <rocess

,-./ 0 0/ :oderate O45/ #)(

"&+ 6he journal entry to record normal spoilage specifically identified with a particular job includes acredit to Wor' in <rocess

,-./ 6 0/ :oderate O45/ #)(

"(+ .poilage occurring on specific jobs should be considered in computing predetermined factoryoverhead rates

,-./ 0 0/ :oderate O45/ #)(

CO$PLETION

1+ , company that manufactures sugar will use a ===================== costing system to trac' production costs

,-./ process

0/ 3asy O45/ #)1

2+ , company that manufactures custom bridal gowns will use a =============== costing system totrac' production costs

,-./ job)order

0/ 3asy O45/ #)1

"+ , company that manufactures large 7uantities of homogeneous goods will normally use a ================= costing system+

,-./ process

0/ 3asy O45/ #)1

#+ , company that manufactures small 7uantities of identifiable products will use a ================costing system+

,-./ job order

0/ 3asy O45/ #)1

$+ 6hree methods of job)cost valuation are normal8 standard8 and =================+

,-./ actual

0/ 3asy O45/ #)1

1*(

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%+ n a normal job order costing system8 factory overhead is applied using =========== rates times ======== input+

,-./ predetermined>actual

0/ 3asy O45/ #)1

&+ n a standard job order costing system8 factory overhead is applied using ============ rates times ======= input+

,-./ predetermined>standard

0/ :oderate O45/ #)1

(+ When a job is begun8 the first document in the job order process is the ====================+

,-./ materials re7uisition

0/ 3asy O45/ #)#

9+ When raw materials are placed into production8 the ====================== account is debited

,-./ Wor' in process

0/ 3asy O45/ #)#

1*+ When indirect materials are added to a job8 the ========================== account is debited+

,-./ manufacturing overhead

0/ 3asy O45/ #)#

11+ When manufacturing overhead is applied to a job in process8 the ================== is debited

,-./ wor' in process

0/ 3asy O45/ #)#

12+ When manufacturing overhead is applied to a job in process8 the =============== account iscredited+


0/ :oderate O45/ #)#

1"+ 6he document that contains all information about the costs of a specific job is a ===================+

,-./ job order cost sheet

0/ 3asy O45/ #)#

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1#+ When indirect labor is recorded for a job in process8 =========================== is debited+


0/ 3asy O45/ #)#

1$+ When production is completed on a job8 finished goods are transferred to the ============================ account+

,-./ 0inished ;oods nventory

0/ 3asy O45/ #)#

1%+ 6he difference between a standard and an actual 7uantity8 price8 or rate is an@================+

,-./ variance

0/ 3asy O45/ #)%

1&+ f a substandard product can be rewor'ed8 it is 'nown as a ==============+

,-./ defect

0/ 3asy O45/ #)(

1(+ f a substandard product cannot be rewor'ed8 it is 'nown as ==============+

,-./ spoilage

0/ 3asy O45/ #)(

19+ Anderapplied factory overhead that is immaterial in amount is closed to ====================== at

year end+

,-./ ost of ;oods .old

0/ 3asy O45/ #)%

2*+ Anderapplied factory overhead that is material in amount is closed to ===============8 ==============8 and ====================== at year end+

,-./ Wor' in <rocess8 0inished ;oods nventory8ost of ;oods .old

0/ 3asy O45/ #)%

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$LTIPLE CHOICE

1+ Which of the following organiBations would be %ost &i'e&( to use a job order costing system?a+ the loan department of a ban' b+ the chec' clearing department of a ban' c+ a manufacturer of processed cheese foodd+ a manufacturer of video cassette tapes

,-./ , 0/ :oderate O45/ #)1

2+ When job order costing is used8 the primary focal point of cost accumulation is thea+ department+ b+ supervisor+c+ item+d+ job+

,-./ 0/ 3asy O45/ #)1

"+ n a job order costing system8a+ standards cannot be used+

b+ an average cost per unit within a job cannot be computed+c+ costs are accumulated by departments and averaged among all jobs+d+ overhead is typically assigned to jobs on the basis of some cost driver+

,-./ 0/ 3asy O45/ #)1

#+ What is the best cost accumulation procedure to use when many batches8 each differing as to productspecifications8 are produced?a+ job order b+ processc+ actuald+ standard

,-./ , 0/ 3asy O45/ #)1

$+ Which of the following could not be used in job order costing?a+ standards b+ an average cost per unit for all jobsc+ normal costingd+ overhead allocation based on the jobCs direct labor hours

,-./ 4 0/ 3asy O45/ #)1

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%+ Which of the following costing methods of valuation are acceptable in a job order costing system?

,ctual:aterial

ost

.tandard:aterial

ost

,ctualLabor ost

<redeterminedOverhead

ost

a+ yes yes no yes

b+ yes no yes no

c+ no yes yes yes

d+ yes yes yes yes

,-./ 0/ 3asy O45/ #)1

&+ Which of the following costing systems allows management to 7uic'ly recogniBe materials8 labor8 andoverhead variances and ta'e measures to correct them?

,ctual ost .ystem -ormal ost .ystem

a+ yes yes

b+ yes no

c+ no yesd+ no no

,-./ 0/ 3asy O45/ #)1

(+ n a normal cost system8 a debit to Wor' in <rocess nventory would not be made for a+ actual overhead+ b+ applied overhead+c+ actual direct material+d+ actual direct labor+

,-./ , 0/ 3asy O45/ #)1

9+ Which of the following are drawbac's to applying actual overhead to production?a+ , delay occurs in assigning costs to jobs or products+ b+ 0luctuations in 7uantities produced during a period could cause varying per)unit charges

for fiDed overhead+c+ .easonality of overhead costs may cause distortions in job or product costs+d+ all answers are correct+

,-./ 0/ 3asy O45/ #)#

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1*+ 5ob order costing and process costing have which of the following characteristics?

5ob Order osting <rocess osting

a+ homogeneous products heterogeneous products

and large quantities and small quantities

b+ homogeneous products heterogeneous products

and small quantities and large quantities

c+ heterogeneous products homogeneous products and large quantities and small quantities

d+ heterogeneous products homogeneous products

and small quantities and large quantities

,-./ 0/ 3asy O45/ #)1

11+ , credit to Wor' in <rocess nventory representsa+ wor' still in process+ b+ raw material put into production+c+ the application of overhead to production+d+ the transfer of completed items to 0inished ;oods nventory+

,-./ 0/ 3asy O45/ #)#

12+ n a job order costing system8 the dollar amount of the entry that debits 0inished ;oods nventory andcredits Wor' in <rocess nventory is the sum of the costs charged to all jobsa+ started in process during the period+ b+ in process during the period+c+ completed and sold during the period+d+ completed during the period+

,-./ 0/ 3asy O45/ #)#

1"+ 6otal manufacturing costs for the year plus beginning Wor' in <rocess nventory cost e7ualsa+ cost of goods manufactured in the year+ b+ ending Wor' in <rocess nventory+c+ total manufacturing costs to account for+d+ cost of goods available for sale+

,-./ 0/ 3asy O45/ #)#

1#+ Which of the following would be &e)st li'ely to be supported by subsidiary accounts or ledgers in acompany that employs a job order costing system?a+ Wor' in <rocess nventory b+ Eaw :aterial nventoryc+ ,ccounts <ayabled+ .upplies nventory

,-./ 0/ 3asy O45/ #)#

11"

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1$+ , journal entry includes a debit to Wor' in <rocess nventory and a credit to Eaw :aterial nventory+6he eDplanation for this would be thata+ indirect material was placed into production+ b+ raw material was purchased on account+c+ direct material was placed into production+d+ direct labor was used for production+

,-./ 0/ 3asy O45/ #)#

1%+ 6he source document that records the amount of raw material that has been re7uested by production isthea+ job order cost sheet+ b+ bill of lading+c+ interoffice memo+d+ material re7uisition+

,-./ 0/ 3asy O45/ #)"

1&+ , material re7uisition form should show all of the following information e*+e,t

a+ job number+ b+ 7uantity re7uired+c+ unit cost+d+ purchase order number+

,-./ 0/ 3asy O45/ #)"

1(+ Which of the following statements about job order cost sheets is tre?a+ ,ll job order cost sheets serve as the general ledger control account for Wor' in <rocess

nventory+ b+ 5ob order cost sheets can serve as subsidiary ledger information for both Wor' in <rocess

nventory and 0inished ;oods nventory+c+ f material re7uisition forms are used8 job order cost sheets do not need to be maintained+d+ 5ob order cost sheets show costs for direct material and direct labor8 but not for

manufacturing overhead since it is an applied amount+

,-./ 4 0/ 3asy O45/ #)"

19+ 6he primary accounting document in a job order costing system is an@a+ bill of materials+ b+ job order cost sheet+c+ employee time sheet+d+ materials re7uisition+

,-./ 4 0/ 3asy O45/ #)"

2*+ 6he cost sheets for incomplete jobs at the end of the period comprise the subsidiary ledger for

a+ 0inished ;oods nventory+ b+ Eaw :aterial nventory+c+ Wor' in <rocess nventory+d+ .upplies nventory+

,-./ 0/ 3asy O45/ #)"

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21+ 6he ========== provides management with a historical summation of total costs for a given product+a+ job order cost sheet b+ employee time sheetc+ material re7uisition formd+ bill of lading

,-./ , 0/ 3asy O45/ #)"

22+ 6he source document that records the amount of time an employee wor'ed on a job and hisFher payrate is thea+ job order cost sheet+ b+ employee time sheet+c+ interoffice memo+d+ labor re7uisition form+

,-./ 4 0/ 3asy O45/ #)"

2"+ Which of the following journal entries records the accrual of the cost of indirect labor used in production?a+ debit Wor' in <rocess nventory8 credit Wages <ayable b+ debit Wor' in <rocess nventory8 credit :anufacturing Overheadc+ debit :anufacturing Overhead8 credit Wor' in <rocess nventoryd+ debit :anufacturing Overhead8 credit Wages <ayable

,-./ 0/ 3asy O45/ #)#

2#+ n job order costing8 payroll taDes paid by the employer for factory employees are commonlyaccounted for asa+ direct labor cost+ b+ manufacturing overhead cost+c+ indirect labor cost+d+ administrative cost+

,-./ 4 0/ 3asy O45/ #)#

2$+ 6he logical eDplanation for an entry that includes a debit to :anufacturing Overhead control and acredit to <repaid nsurance isa+ the insurance company sent the company a refund of its policy premium+ b+ overhead for insurance was applied to production+c+ insurance for production e7uipment eDpired+d+ insurance was paid on production e7uipment+

,-./ 0/ 3asy O45/ #)#

2%+ 6he journal entry to apply overhead to production includes a credit to :anufacturing Overhead controland a debit to

a+ 0inished ;oods nventory+ b+ Wor' in <rocess nventory+c+ ost of ;oods .old+d+ Eaw :aterial nventory+

,-./ 4 0/ 3asy O45/ #)#

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2&+ <roduction overhead does not include the costs of a+ factory depreciation and supplies+ b+ factory employeesC cafeteria departments+c+ production line labor+d+ the maintenance department for the factory+

,-./ 0/ 3asy O45/ #)#

2(+ n a job order costing system8 the use of indirect material would usually be reflected in the generalledger as an increase ina+ stores control+ b+ wor' in process control+c+ manufacturing overhead applied+d+ manufacturing overhead control+

,-./ 0/ 3asy O45/ #)#

29+ , credit to the :anufacturing Overhead control account represents thea+ actual cost of overhead incurred+ b+ actual cost of overhead paid this period+c+ amount of overhead applied to production+d+ amount of indirect material and labor used during the period+

,-./ 0/ 3asy O45/ #)#

"*+ 6he journal entry to record the incurrence and payment of overhead costs for factory insurancere7uires a debit toa+ ash and a credit to :anufacturing Overhead+ b+ :anufacturing Overhead and a credit to ,ccounts <ayable+c+ :anufacturing Overhead and a credit to ash+d+ Wor' in <rocess nventory and a credit to ash+

,-./ 0/ 3asy O45/ #)#

"1+ Overhead is applied to jobs in a job order costing systema+ at the end of a period+ b+ as jobs are completed+c+ at the end of a period or as jobs are completed8 whichever is earlier+d+ at the end of a period or as jobs are completed8 whichever is later+

,-./ 0/ 3asy O45/ #)#

"2+ n a job order costing system8 the subsidiary ledger for 0inished ;oods nventory is comprised of a+ all job order cost sheets+ b+ job order cost sheets for all uncompleted jobs+c+ job order cost sheets for all completed jobs not yet sold+

d+ job order cost sheets for all ordered8 uncompleted8 and completed jobs+

,-./ 0/ 3asy O45/ #)#

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""+ Anderapplied overhead resulting from unanticipated and immaterial price increases for overhead itemsshould be written off bya+ decreasing ost of ;oods .old+ b+ increasing ost of ;oods .old+c+ decreasing ost of ;oods .old8 Wor' in <rocess nventory8 and 0inished ;oods nventory+d+ increasing ost of ;oods .old8 Wor' in <rocess nventory8 and 0inished ;oods nventory+

,-./ 4 0/ 3asy O45/ #)#

"#+ Overapplied overhead would result if a+ the plant were operated at less than normal capacity+ b+ overhead costs incurred were less than costs charged to production+c+ overhead costs incurred were unreasonably small in relation to units produced+d+ overhead costs incurred were greater than costs charged to production+

,-./ 4 0/ 3asy O45/ #)#

"$+ ebits to ost of ;oods .old typically represent thea+ transfer of completed items to 0inished ;oods nventory+ b+ costs of items sold+c+ selling price of items sold+d+ the cost of goods manufactured+

,-./ 4 0/ 3asy O45/ #)#

"%+ n a perpetual inventory system8 a transaction that re7uires two journal entries or one compoundentry@ is needed whena+ raw materials are purchased on account+ b+ goods are sold for either cash or on account+c+ goods are finished and transferred out of Wor' in <rocess nventory+d+ overhead is applied to Wor' in <rocess nventory+

,-./ 4 0/ 3asy O45/ #)#

"&+ Which of the following statements is .)&se?a+ While the use of standard costing is acceptable for job order costing systems8 actual cost

records should still be maintained+ b+ t is normally more time)consuming for a company to use standard costs in a job order

costing system+c+ .tandards can be used in a job order costing system8 if the company usually produces

items that are similar in nature+d+ .tandard costs may be used for material8 labor8 or both material and labor in a job order

costing environment+

,-./ 4 0/ 3asy O45/ #)%

"(+ 6he trend in job order costing is toa+ eliminate the data entry function for the accounting system+ b+ automate the data collection and data entry functions+c+ use accounting software to change the focal point of the job order system+d+ create an ntranet to share information between competitors+

,-./ 4 0/ 3asy O45/ #)$

"9+ ,s data input functions are automated8 ntranet data becomes more

11&

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a+ complicated to access+ b+ manufacturing8 but not accounting8 oriented+c+ real)time accessible+d+ eDpensive to install8 but easier to use+

,-./ 0/ 3asy O45/ #)$

#*+ 6he use of standard material or labor costs in job order costinga+ is similar to the use of predetermined overhead rates in a normal costing system+

b+ will 'eep actual costs of jobs from fluctuating due to changes in component costs+c+ is appropriate for any company ma'ing a units to customer specification+d+ all answers are correct+

,-./ , 0/ 3asy O45/ #)%

#1+ ,fter the completion of production8 standard and actual costs are compared to determine the ====== of the production process+a+ effectiveness b+ compleDityc+ homogeneityd+ efficiency

,-./ 0/ 3asy O45/ #)1

#2+ , company producing which of the following would be %ost li'ely to use a price standard formaterial?a+ furniture b+ -0L)logo jac'etsc+ picture framesd+ none of the above

,-./ 4 0/ :oderate O45/ #)1

#"+ , company producing which of the following would be %ost li'ely to use a time standard for labor?

a+ mattresses b+ picture framesc+ floral arrangementsd+ stained)glass windows

,-./ , 0/ :oderate O45/ #)1

##+ , service organiBation would be most li'ely to use a predetermined overhead rate based ona+ machine hours+ b+ standard material cost+c+ direct labor+d+ number of complaints+

,-./ 0/ 3asy O45/ #)&

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#$+ Gnowing specific job costs enables managers to effectively perform which of the following tas's?a+ estimate costs of future jobs+ b+ establish realistic job selling prices+c+ evaluate job performance+d+ all answers are correct+

,-./ 0/ 3asy O45/ #)1

#%+ , job order costing system is li'ely to provide better

1@ inventory valuations for financial statements+2@ control over inventory+"@ information about ability to accept additional production wor'+

1@ 2@ "@

a+ yes no no

b+ no yes yes

c+ no no no

d+ yes yes yes

,-./ 0/ ifficult O45/ #)1

#&+ n a production environment that manufactures goods to customer specifications8 a job order costingsystema+ can be used only if standard costs are used for materials and labor+ b+ will provide reasonable product cost information only when all jobs utiliBe approDimately

the same 7uantities of material and labor+c+ may be maintained using either actual or predetermined overhead rates+d+ emphasiBes that large customers create the most costs even though they also provide the

most revenues+

,-./ 0/ ifficult O45/ #)%

#(+ , unit that is rejected at a 7uality control inspection point8 but that can be rewor'ed and sold8 isreferred to as aa+ spoiled unit+ b+ scrap unit+c+ abnormal unit+d+ defective unit+

,-./ 0/ 3asy O45/ #)(

#9+ 6he cost of abnormal losses net of disposal costs@ should be written off as

<roduct cost <eriod cost

a+ yes no

b+ yes yes

c+ no yes

d+ no no

,-./ 0/ 3asy O45/ #)(

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$*+ n a job order costing system8 the net cost of normal spoilage is e7ual toa+ estimated disposal value plus the cost of spoiled wor'+ b+ the cost of spoiled wor' minus estimated spoilage cost+c+ the units of spoiled wor' times the predetermined overhead rate+d+ the cost of spoiled wor' minus the estimated disposal value+

,-./ 0/ :oderate O45/ #)(

$1+ f abnormal spoilage occurs in a job order costing system8 has a material dollar value8 and is related to

a specific job8 the recovery value of the spoiled goods should be

debited to credited to

a+ a scrap inventory account the specific job in process

b+ the specific job in process overhead

c+ a loss account the specific job in process

d+ factory overhead sales

,-./ , 0/ :oderate O45/ #)(

$2+ n a job order costing system8 the net cost of normal spoilage is e7ual to

a+ estimated disposal value plus the cost of spoiled wor'+ b+ the cost of spoiled wor' minus estimated spoilage cost+c+ the units of spoiled wor' times the predetermined overhead rate+d+ the cost of spoiled wor' minus the estimated disposal value+

,-./ 0/ :oderate O45/ #)(

$"+ .hrin'age should be treated asa+ defective units+ b+ spoiled units+c+ miscellaneous eDpense+d+ a reduction of overhead+

,-./ 4 0/ 3asy O45/ #)(

$#+ .poiled units area+ units that cannot be economically rewor'ed to bring them up to standard+ b+ units that can be economically rewor'ed to bring them up to standard+c+ the same as defective units+d+ considered abnormal losses+

,-./ , 0/ 3asy O45/ #)(

$$+ ,bnormal spoilage isa+ spoilage that is forecasted or planned+ b+ spoilage that is in eDcess of planned+c+ accounted for as a product cost+d+ debited to ost of ;oods .old+

,-./ 4 0/ 3asy O45/ #)(

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$%+ -ormal spoilage is defined as unacceptable production thata+ arises because of a special job or process+ b+ occurs in on)going operations+c+ is caused specifically by human error+d+ is in eDcess of that which is eDpected+

,-./ 4 0/ 3asy O45/ #)(

$&+ Which of the following would fall within the range of tolerance for a production cycle?

,bnormal loss -ormal loss

a+ yes yes

b+ yes no

c+ no no

d+ no yes

,-./ 0/ 3asy O45/ #)(

$(+ 6he net cost of normal spoilage in a job order costing system in which spoilage is common to all jobsshould be

a+ assigned directly to the jobs that caused the spoilage+ b+ charged to manufacturing overhead during the period of the spoilage+c+ charged to a loss account during the period of the spoilage+d+ allocated only to jobs that are completed during the period+

,-./ 4 0/ :oderate O45/ #)(

$9+ ajun ompany+ uses a job order costing system+ uring ,pril 2*%8 the following costs appeared inthe Wor' in <rocess nventory account/

4eginning balance $ 24,000

irect material used 70,000

irect labor incurred 60,000

,pplied overhead 48,000

ost of goods manufactured 8!,000

ajun ompany applies overhead on the basis of direct labor cost+ 6here was only one job left in Wor' in <rocess at the end of ,pril which contained I$8%** of overhead+ What amount of direct material wasincluded in this job?a+ I#8#** b+ I#8#(*c+ I%892*d+ I(8***

,-./ ,

Total Costs Incurred 202,000Less: Cost of Goods anufactured !185,000"

Costs re#a$n$n% $n &I' 17,000

()er*ead 5,600

+$rect Laor !5,600-.80" 7,000 !12,600"

+$rect ater$als 4,400


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%*+ Juest o+ is a print shop that produces jobs to customer specifications+ uring 5anuary 2*%8 5obK"*$1 was wor'ed on and the following information is available/

irect material used $2,!00

irect labor hours wor'ed !

:achine time used 6

irect labor rate per hour $7

Overhead application rate per hour of machine time $8

What was the total cost of 5ob K"*$1 for 5anuary?a+ I28&1" b+ I28&&*c+ I28(12d+ I"8*$2

,-./ ,

+$rect ater$als / 2,500

+$rect Laor !15 *ours /7-*our" 105

actor ()er*ead !6 *rs #ac*$ne t$#e

/18-#ac* *r" 108/ 2,713

0/ 3asy O45/ #)#

A&,/) Co%,)n(

,lpha o+ uses a job order costing system+ ,t the beginning of 5anuary8 the company had two jobs in process with the following costs/

irect :aterial irect Labor Overhead

5ob K#$% $",400 $!0 $2!!

5ob K#%1 ,00 28#

,lpha pays its wor'ers I(+$* per hour and applies overhead on a direct labor hour basis+

%1+ Eefer to ,lpha ompany+ What is the overhead application rate per direct labor hour?a+ I *+$* b+ I 2+**c+ I #+2$d+ I"*+**

,-./

+$rect Laor ours: /510-/8.50 60 *rs()er*ead l$cat$on ate:

/255 - 60 *rs / 4.25

0/ 3asy O45/ #)#

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%2+ Eefer to ,lpha ompany+ How much overhead was included in the cost of 5ob K#%1 at the beginningof 5anuary?a+ I 1##+$* b+ I 1$"+**c+ I282**+**d+ I28#$%+$*

,-./ ,

+$rect Laor ours: /289-/8.50 34 *rs

()er*ead l$cat$on ate:

/255 - 60 *rs / 4.25

34 *rs /4.25-*r / 144.50

0/ 3asy O45/ #)#

%"+ Eefer to ,lpha ompany+ uring 5anuary8 ,lphas employees wor'ed on 5ob K%#9+ ,t the end of themonth8 I&1# of overhead had been applied to this job+ 6otal Wor' in <rocess at the end of the monthwas I%8(** and all other jobs had a total cost of I"89(1+ What amount of direct material is included in5ob K%#9?a+ I %&&+** b+ I18"91+**c+ I281#2+**d+ I#8%$(+**

,-./ ,

+$rect ater$also 649Total &or $n 'rocess / 6,800

(t*er &or $n 'rocess !3,981"

Costs re#a$n$n% $n &I' 2,819

()er*ead 714

+$rect Laor !( x 2" /714 2 1,428 !2,142"

+$rect ater$als / 677

0/ ifficult O45/ #)#

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%#+ 4rown orporation manufactures products on a job order basis+ 6he job cost sheet for 5ob K%$% showsthe following for :arch/

irect material $!,000

irect labor 1** hours M I&+2$@ $72!

:achine hours incurred 40

<redetermined overhead rate per machine hour $26

,t the end of :arch8 what total cost appears on the job cost sheet for 5ob K%$%?a+ I$8&2$ b+ I$8&%$c+ I%8&%$d+ I(8"2$

,-./

+$rect ater$als / 5,000

+$rect Laor !15 *ours /7-*our" 725

actor ()er*ead !26 *rs #ac*$ne t$#e

/40-#ac* *r" 1,040

/ 6,765

0/ 3asy O45/ #)#

%$+ <roducts at Eedd :anufacturing are sent through two production departments/ 0abricating and0inishing+ Overhead is applied to products in the 0abricating epartment based on 1$* percent ofdirect labor cost and I1( per machine hour in 0inishing+ 6he following information is available about5ob K29&/

0abricating 0inishing

irect material $,!#0 $!80

irect labor cost 48

irect labor hours 22 6

:achine hours ! !

Overhead applied 42#

What is the total cost of 5ob K29&?a+ I28%#& b+ I"8**$c+ I"8*9"d+ I"82*"

,-./

+$rect Laor ar$cat$n% /429-1.50 /286 l$ed ()er*ead $n$s*$n% 15 *rs /18

/270ar$cat$n% $n$s*$n%

+$rect #ater$al / 1,590 / 580+$rect laor cost 2#! 48()er*ead al$ed 429 2"-

Total Costs 2,305 898 . 32-3


12#

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%%+ Nirginia ompany applies overhead to jobs at the rate of #* percent of direct labor cost+ irectmaterial of I182$* and direct labor of I18#** were eDpended on 5ob K1#$ during 5une+ On :ay "18 the balance of 5ob K1#$ was I28(**+ 6he balance on 5une "* is/a+ I"821*+ b+ I#8&%*+c+ I$8#$*+d+ I%8*1*+

,-./

;e%$nn$n% &I' / 2,800


+$rect Laor 1,400

actor ()er*ead !/1400 40<" 560

=nd$n% &I' / 6,010

0/ 3asy O45/ #)#

J)+'son Co%,)n(0

5ac'son ompany uses a job order costing system and the following information is available from itsrecords+ 6he company has three jobs in process/ K%8 K98 and K1"+

Eaw material used $20,000

irect labor per hour $8%!0

Overhead applied based on direct labor cost 20&

irect material was re7uisitioned as follows for each job respectively/ "* percent8 2$ percent8 and 2$ percent> the balance of the re7uisitions was considered indirect+ irect labor hours per job are 28$**>"81**> and #82**> respectively+ ndirect labor is I""8***+ Other actual overhead costs totaled I"%8***+

%&+ Eefer to 5ac'son ompany+ What is the prime cost of 5ob K%?a+ I#282$* b+ I$&82$*c+ I&"82$*d+ I(28&$*

,-./ 4

+$rect ater$als !120,000 30<" / 36,000

+$rect Laor !2500 /8.50" 21,250

Total 'r$#e Costs / 57,250


12$

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%(+ Eefer to 5ac'son ompany+ What is the total amount of overhead applied to 5ob K9?a+ I1(82$* b+ I2%8"$*c+ I"*8***d+ I"18%2*

,-./ +$rect Laor ours +$rect Laor ate ( l$cat$on ate Total

3100 /8.50 120< /31,620


%9+ Eefer to 5ac'son ompany+ What is the total amount of actual overhead?a+ I"%8*** b+ I%98***c+ I9"8***d+ I9989%*

,-./

Ind$rect ater$als !/120,000 20<" / 24,000

Ind$rect Laor 33,000

(t*er ()er*ead Costs 36,000

Total 'r$#e Costs / 93,000


&*+ Eefer to 5ac'son ompany+ How much overhead is applied to Wor' in <rocess?a+ I %98*** b+ I 9989%*c+ I1"289%*

d+ I1##8***

,-./ 4

+$rect Laor ours 6 2500

9 3100

13 4200 9,800

+$rect Laor ate / 8.50

()er*ead l$cat$on ate 120<

Total ()er*ead l$ed / 99,960


12%

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&1+ Eefer to 5ac'son ompany+ f 5ob K1" is completed and transferred8 what is the balance in Wor' in<rocess nventory at the end of the period if overhead is applied at the end of the period?a+ I 9%8&** b+ I 998*2*c+ I1"98$#*d+ I1&*8&2*

,-./

>te 1: +eter#$ne Total Cost of o 13 +: /120,000 .25 / 30,000

+L: 4,200 8.50 35,700

(: 35,700 120< 42,840 108,540

>te 2: Co#ute Total Cost of o 6

+: /120,000 .30 / 36,000

+L: 2,500 8.50 21,250

(: 21,250 120< 25,500 82,750

>te 2: Co#ute Total Cost of o 9 +: /120,000 .25 / 30,000

+L: 3,100 8.50 26,350

(: 26,350 120< 31,620

87,970

Total $osts of 0obs ! and 1"-"2-

0/ ifficult O45/ #)#

12&

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&2+ Eefer to 5ac'son ompany+ ,ssume the balance in Wor' in <rocess nventory was I1(8$** on 5une 1and I2$829& on 5une "*+ 6he balance on 5une "* represents one job that contains direct material ofI1182$*+ How many direct labor hours have been wor'ed on this job rounded to the nearest hour@?a+ &$1 b+ 18"2#c+ 18%$"d+ 289&%

,-./ ,

>te 1: +eter#$ne +L and ( &I' at une 30: / 25,297

Less + $n &I' 11,250 14,047

>te 2: >earate +L and (

Let x +L? 1.2x (

x @ 1.2x 14,047

2.2x 14,047

x /6,385

>te 3: Co#ute +L ours /6,385 A 8.50 "1 'ours


Bet) Co%,)n(

6he following information pertains to 4eta ompany for .eptember 2*#+

irect :aterial irect Labor Overhead

5ob K"2" $",200 $4,!00

5ob K"2$ !,000

5ob K#*1 !,670 $!,!!0

4eta ompany applies overhead for 5ob K"2" at 1#* percent of direct labor cost and at 1$* percent ofdirect labor cost for 5obs K"2$ and K#*1+ 6he total cost of 5obs K"2" and K"2$ is identical+

&"+ Eefer to 4eta o+ What amount of overhead is applied to 5ob K"2"?a+ I#8(** b+ I$8$$*c+ I%8"**d+ I&8$**

,-./

+$rect Laor l$cat$on ate Total()er*ead

/4,500 140< /6,300

0/ 3asy O45/ #)#

12(

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&#+ Eefer to 4eta o+ What amount of overhead is applied to 5ob K"2$?a+ I(8"2$ b+ I&8$**c+ I&8***d+ I$8***

,-./ 4

+$rect Laor l$cat$on ate Total

()er*ead/5,000 150< /7,500

0/ 3asy O45/ #)#

&$+ Eefer to 4eta o+ What is the amount of direct materials for 5ob K"2$?a+ I189$* b+ I18$**c+ I"8&**d+ I&8$**

,-./ 4

>te 1: +eter#$ne ( for os 323 and 325323 / 6,300

325 7,500

>te 2: Co#ute Total Cost of o 323 + / 3,200

+L 4,500

( 6,300 14,000

>te 3: Co#ute +$rect ater$als for o 325

!14,000 !5,000 @ 7,500" . 1--


129

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&%+ Eefer to 4eta o+ ,ssume that 5obs K"2" and K#*1 are incomplete at the end of .eptember+ What is the balance in Wor' in <rocess nventory at that time?a+ I1(892* b+ I228%2*c+ I2(892*d+ I"*812*

,-./

>te 1: +eter#$ne +L for o 401/5,550 A 150< 3,700


+L 3,700

( 5,550 14,920


+L 4,500

( 6,300 14,000

Total Costs of os 323 and 401 2#2-


C)%den Co%,)n(

amden ompany has two departments <rocessing and <ac'aging@ and uses a job order costingsystem+ 4a'er applies overhead in <rocessing based on machine hours and on direct labor cost in<ac'aging+ 6he following information is available for 5uly/

<rocessing <ac'aging:achine hours 2,!00 ,000

irect labor cost $44,!00 $2",000

,pplied overhead $!!,000 $!,7!0

&&+ Eefer to amden ompany+ What is the overhead application rate per machine hour for <rocessing?a+ I *+(1 b+ I 1+2#c+ I1&+(*d+ I22+**

,-./

Total l$ed ()er*ead ac*$ne ours ate er our /55,000 2,500 /22.00

0/ 3asy O45/ #)#

1"*

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&(+ Eefer to amden o+ What is the overhead application rate for <ac'aging?a+ I *+## b+ I 2+2$c+ I2"+**d+ I$1+&$

,-./ 4Total l$ed

()er*ead

Total +$rect Laor ate er

our /51,750 /23,000 /2.25

0/ 3asy O45/ #)#

Tiger Co%,)n(

6iger ompany has a job order costing system and an overhead application rate of 12* percent ofdirect labor cost+ 5ob K%" is charged with direct material of I128*** and overhead of I&82**+ 5ob K%#has direct material of I28*** and direct labor of I98***+

&9+ Eefer to 6iger o+ What amount of direct labor cost has been charged to 5ob K%"?

a+ I %8*** b+ I &82**c+ I (8%#*d+ I1#8#**

,-./ ,Total l$ed

()er*ead()er*ead

l$cat$onate

+$rect Laor C*ar%ed

/7,200 120< /6,000

0/ 3asy O45/ #)#

(*+ Eefer to 6iger ompany+ What is the total cost of 5ob K%#?a+ I1*8(** b+ I118***c+ I218(**d+ I"*82**

,-./


+$rect Laor 9,000

actor ()er*ead !/9,000 120<"

10,800

Total Cost of o 64 21,800

0/ 3asy O45/ #)#

1"1

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Br)d&e( Co%,)n(

4radley ompany uses a job order costing system+ ,ssume that 5ob K$*# is the only one in process+6he following information is available/

4udgeted direct labor hours 6!,000 4udgeted machine hours #,000

4udgeted overhead $"!0,000 irect material $0,!00

irect labor cost $70,000

(1+ Eefer to 4radley ompany+ What is the overhead application rate if 4radley uses a predeterminedoverhead application rate based on direct labor hours rounded to the nearest whole dollar@?a+ I *+2* b+ I $+**c+ I $+"(d+ I"(+(9

,-./ ;ud%eted()er*ead

;ud%eted +$rectLaor ours

()er*ead l$cat$on ate

/350,000 65,000 /5.38

0/ 3asy O45/ #)#

(2+ Eefer to 4radley ompany+ What is the total cost of 5ob K$*# assuming that overhead is applied at therate of 1"$ of direct labor cost rounded to the nearest whole dollar@?a+ I1928%$* b+ I2%(82$*c+ I2&$8***d+ I"298%&$

,-./


+$rect Laor 70,000

actor ()er*ead !/70,000 135<" 94,500

Total Cost of o B504 275,000

0/ 3asy O45/ #)#

1"2

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("+ ,t the end of the last fiscal year8 Eoberts ompany had the following account balances/

Overapplied overhead $ 6,000

ost of ;oods .old $#80,000

Wor' in <rocess nventory $ "8,000

0inished ;oods nventory $ 82,000

f the most common treatment of assigning overapplied overhead were used8 the final balance in ostof ;oods .old is/a+ I9&#8***+ b+ I9&#8%%*+c+ I9($8"#*+d+ I9(%8***+

,-./ ,nadDusted C(G> less: ()eral$ed ( dDusted C(G>/980,000 /6,000 /974,000

0/ 3asy O45/ #)#

(#+ .trong <roducts has no Wor' in <rocess or 0inished ;oods inventories at the close of business onecember "18 2*#+ 6he balances of .trong <roducts accounts as of ecember "18 2*#8 are asfollows/

ost of goods sold))unadjusted $2,040,000

.elling P administrative eDpenses #00,000

.ales ",600,000

:anufacturing overhead control 700,000

:anufacturing overhead applied 648,000

<retaD income for 2*# is/a+ I%*(8***+

b+ I%%*8***+c+ I&128***+d+ undeterminable from the information given+

,-./ ,

>ales / 3,600,000

Cost of Goods >old 2,040,000

actor ()er*ead nderal$ed !700,000648,000" 52,000 !2,092,000"

>ell$n%, General and d#$n$strat$)e =xenses !900,000"

'retax Inco#e / 608,000


1""

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1i&son $)n.)+tring Co%,)n(

Wilson :anufacturing ompany produces beach chairs+ hair frames are all the same siBe8 but can bemade from plastic8 wood8 or aluminum+ Eegardless of frame choice8 the same sailcloth is used for theseat on all chairs+ Wilson has set a standard for sailcloth of I9+9* per s7uare yard and each chairre7uires 1 s7uare yard of material+ Wilson produced $** plastic chairs8 1** wooden chairs8 and 2$*aluminum chairs during 5une+ 6he total cost for 18*** s7uare yards of sailcloth during the month wasI1*8***+ ,t the end of the month8 $* s7uare yards of sailcloth remained in inventory+

($+ Eefer to Wilson :anufacturing ompany+ 6he unfavorable material price variance for sailcloth purchases for the month wasa+ I 1**+ b+ I #9$+c+ I18*9*+d+ I18$($+

,-./ ,

/10,000 A 1,000 /10.00 er ard

/!9.90 10.00" 1,000 ards .1--

0/ :oderate O45/ #)%

(%+ Eefer to Wilson :anufacturing ompany+ ,ssuming that there was no sailcloth in inventory at the beginning of 5une8 the unfavorable material 7uantity variance for the month wasa+ I #9$+ b+ I $**+c+ I 99*+d+ I18***+

,-./

850 c*a$rs 1 ard er c*a$r 850 ards

ctual usa%e !1,000 50" 950 ards

nfa)orale usa%e )ar$ance 100 ards

9.90-ard

/ 990

0/ :oderate O45/ #)%

(&+ Eefer to Wilson :anufacturing ompany+ Wilson could set a standard cost for which of thefollowing?

0ramecost

<redeterminedOH rate

Labor rate

a+ yes yes yes

b+ no no no

c+ yes no no

d+ no yes yes

,-./ 0/ ifficult O45/ #)%

1"#

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PROBLE$

1+ <repare the necessary journal entries from the following information for ,nderson ompany8 whichuses a perpetual inventory system+

a+ <urchased raw material on account8 I$%8&**+ b+ Ee7uisitioned raw material for production as follows/ direct material)(* percent of

purchases> indirect material)1$ percent of purchases+c+ irect labor wages of I""81** are accrued as are indirect labor wages of I128$**+d+ Overhead incurred and paid for is I%%89**+e+ Overhead is applied to production based on 11* percent of direct labor cost+f+ ;oods costing I9&8%** were completed during the period+g+ ;oods costing I$18"2* were sold on account for I&&8%**+

,-./

a+ Eaw :aterial nventory !6,700

,ccounts <ayable !6,700

b+ Wor' in <rocess nventory 4!,"60

:anufacturing Overhead 8,!0! Eaw :aterial nventory !",86!

c+ Wor' in <rocess nventory "",00

:anufacturing Overhead 2,!00

Wages <ayable 4!,600

d+ :anufacturing Overhead 66,#00

ash 66,#00

e+ Wor' in <rocess nventory "6,40

:anufacturing Overhead "6,40

f+ 0inished ;oods nventory #7,600

Wor' in <rocess nventory #7,600

g+ ost of ;oods .old !,"20

0inished ;oods nventory !,"20,ccounts Eeceivable 77,600

.ales 77,600

0/ 3asy O45/ #)#

1"&

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2+ Eichards ompany employs a job order costing system+ Only three jobs)5ob K2*$8 5ob K2*%8 and 5obK2*&)were wor'ed on during 5anuary and 0ebruary+ 5ob K2*$ was completed 0ebruary 1*> the othertwo jobs were still in production on 0ebruary 2(8 the end of the companyCs operating year+ 5ob costsheets on the three jobs follow/

5ob ost .heet

5ob K2*$ 5ob K2*% 5ob K2*&5anuary costs incurred/ irect material $6,!00 $ #,"00 $ '

irect labor ",000 7,000 '

:anufacturing overhead 20,800 ,200 '

0ebruary costs incurred/ irect materials ' 8,200 2,"00

irect labor 4,000 6,000 0,000

:anufacturing overhead

6he following additional information is available/

a+ :anufacturing overhead is assigned to jobs on the basis of direct labor cost+

b+ 4alances in the inventory accounts at 5anuary "1 were as follows/

Eaw :aterial $40,000

Wor' in <rocess

0inished ;oods 8!,000

Re2ired3

a+ <repare 6)accounts for Eaw :aterial8 Wor' in <rocess nventory8 0inished ;oodsnventory8 and :anufacturing Overhead ontrol+ 3nter the 5anuary "1 inventory balances given previously> in the case of Wor' in <rocess nventory8 compute the5anuary "1 balance and enter it into the Wor' in <rocess nventory 6)account+

b+ <repare journal entries for #ebr)r( as follows/

1+ <repare an entry to record the issue of materials into production and post the entry toappropriate 6)accounts+ n the case of direct material8 it is not necessary to ma'e aseparate entry for each job+@ ndirect materials used during 0ebruary totaled I#8***+

2+ <repare an entry to record the incurrence of labor cost and post the entry to appropriate 6)accounts+ n the case of direct labor8 it is not necessary to ma'e a separate entry for each job+@ ndirect labor cost totaled I(8*** for 0ebruary+

"+ <repare an entry to record the incurrence of I198*** in various actual manufacturing

overhead costs for 0ebruary credit ,ccounts <ayable@+

1"(

8/20/2019 chapter-4 TB 11232015


c+ What apparent predetermined overhead rate does the company use to assignoverhead cost to jobs? Asing this rate8 prepare a journal entry to record theapplication of overhead cost to jobs for 0ebruary it is not necessary to ma'e aseparate entry for each job@+ <ost this entry to appropriate 6)accounts+

d+ ,s stated earlier8 5ob K2*$ was completed during 0ebruary+ <repare a journal entry toshow the transfer of this job off of the production line and into the finished goodwarehouse+ <ost the entry to appropriate 6)accounts+

e+ etermine the balance at 0ebruary 2( in the Wor' in <rocess inventory account+How much of this balance consists of the cost of 5ob K2*%? 5ob K2*&?

,-./a+

(a) *aterials

+nventory

or- in .rocess

+nventory

// 40,000 // 77,800

2#,!00 60,700

",!00 20,000

"2,000

#8,600

inished 1oods

+nventory

*anufacturing

verhead 3ontrol

// 8!,000 4,000

60,700 8,000 "2,000

#,000

b+ 1+ Wor' in <rocess nventory 2#,!00

:anufacturing Overheadontrol

4,000

Eaw :aterials nventory "",!00

2+ Wor' in <rocess nventory 20,000

:anufacturing Overheadontrol

8,000

<ayroll 28,000

"+ :anufacturing Overheadontrol

#,000

,ccounts <ayable #,000

c+ 1%*FL O.6 × I2*8*** S I"28***

Wor' in <rocess nventory "2,000

:anufacturing Overhead ontrol "2,000

1"9

8/20/2019 chapter-4 TB 11232015


d+ 0inished ;oods nventory 60,700

Wor' in <rocess nventory 60,700

e+ W< -N #8,600

5ob 2*% SI$18"**

5ob 2*& S I#&8"**

5O4 K2*$ 5O4 K2*% 5O4 K2*&

4eg W< $!0,"00 $27,!00

irect :at 0 8,200 $2,"00

irect Labor 4,000 6,000 0,000

0actory Overhead 6,400 #,600 6,000

$60,700 $!,"00 $47,"00


1#*

8/20/2019 chapter-4 TB 11232015


"+ 6he <ittman ompany manufactures special purpose machines to order+ On 5anuary 18 there were two jobs in process8 K&*$ and K&*%+ 6he following costs were applied to these jobs in the prior year/

5ob -o+

&*$ &*%irect material $ !,000 $ 8,000

irect labor 4,000 ",000

Overhead 4,400 ","00

6otal $",400 $4,"00

uring 5anuary8 the following transactions too' place/

T Eaw material costing I#*8*** was purchased on account+T 5obs K&*&8 K&*(8 and K&*9 were started and the following costs were applied to

them/

5O4

&*& &*( &*9irect materials $",000 $0,000 $7,000

irect labor !,000 6,000 4,000

T 5ob K&*$ and 5ob K&*% were completed after incurring additional direct labor costsof I28*** and I#8***8 respectively

T Wages paid to production employees during 5anuary totaled I2$8***+T epreciation for the month of 5anuary totaled I1*8***+T Atilities bills in the amount of I1*8*** were paid for operations during ecember+T Atilities bills totaling I128*** were received for 5anuary operations+T .upplies costing I28*** were used+T :iscellaneous overhead eDpenses totaled I2#8*** for 5anuary+

,ctual overhead is applied to individual jobs at the end of each month using a rate based on actualdirect labor costs+

Re2ired3

a+ etermine the 5anuary overhead rate+

b+ etermine the cost of each job+

c+ <repare a statement of cost of goods manufactured+

,-./

a+ :OH I#8*** U I1*8*** U I128*** U I28*** U I2#8*** S I$28*** S I2+#&%2Fdl cost

I218*** dl cost

b+

5O4K&*$

5O4K&*%

5O4K&*&

5O4K&*(

5O4K&*9

: $ ",000 $0,000 $ ,000 5 $ 20,000

L $ 2,000 $ 4,000 !,000 6,000 4,000 5 2,000

:OH 4,#!2 #,#0! 2,"8 4,8!7 #,#0! 5 !2,000

4eg W< ",400 4,"00 5 27,700

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$20,"!2 $28,20! $20,"8 $"0,8!7 $20,#0! $20,700

c+ 4eg W< $27,700

U : 20,000

U L 2,000

U :OH !2,000

) 3nd W< 72,4"

$48,!!7


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#+ 6he Western orporation8 began operations on October 1+ t employs a job order costing system+Overhead is charged at a normal rate of I2+$* per direct labor hour+ 6he actual operations for themonth of October are summariBed as follows/

a+ <urchases of raw material8 2$8*** pieces M I1+2*Fpiece+

b+ :aterial and labor costs charged to production/

5ob -o+ Anits :aterialirect

labor costirect

labor hours0 0,000 $4,000 $6,000 ",000

02 8,800 ",600 !,400 2,700

0" 6,000 7,000 #,000 4,!00

04 8,000 ",200 4,800 2,400

0! 20,000 8,000 ",600 ,800

c+ ,ctual overhead costs incurred/

Nariable $8,!00

0iDed !,000

d+ ompleted jobs/ 1*18 1*28 1*"8 and 1*#

e+ .ales)I1*$8***+ ,ll units produced on 5obs 1*18 1*28 and 1*" were sold+

Re2ired3 ompute the following balances on October "1/

a+ :aterial inventory

b+ Wor' in process inventory

c+ 0inished goods inventory

d+ ost of goods sold

e+ Ander) or overapplied overhead

,-./

a+ I"*8*** ) I#8*** U I"8%** U I&8*** U I"82** U I(8***@ S I#82** b+ 5ob K1*$ I(8*** U I"8%** U I18(** × 2+$*@ S I1%81**

c+ 5ob K1*# I"82** U I#8(** U I28#** × 2+$*@ S I1#8***

d+ 5ob K 1*1 I#8*** U I%8*** U I"8*** × 2+$*@ S $7,!00

1*2 I"8%** U I$8#** U I28&** × 2+$*@ S !,7!01*" I&8*** U I98*** U I#8$** × 2+$*@ S 27,2!0

$60,!00

e+ ,pplied 1#8#** × I2+$* S $"6,000

,ctual "",!00

Overapplied $ 2,!00

1#"

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(+ .anderson ompany manufactures custom)built conveyor systems for factory and commercialoperations+ 3rin .mith is the cost accountant for .anderson and she is in the process of educating anew employee8 Heather 0ontenot about the job order costing system that .anderson uses+ 6he systemis based on normal costs> overhead is applied based on direct labor cost and rounded to the neDt wholedollar+@ Lisa gathers the following job order cost records for 5uly/

irect irect 6otal5ob -o+ :aterials Labor ,pplied OH ost667 $ !,#0 $,7"0 $ ,##0 $ #,62

66# 8,"2 ,80 2,082 22,204670 406 !00 !7! ,48

67 !,40! #,!00 0,#2! 7,8"0

672 #,6! !!0 6"" 0,7#8

6o eDplain the missing job number8 3rin informed Heather that 5ob K%%( had been completed in 5une+.he also told her that 5ob K%%& was the only job in process at the beginning of 5uly+ ,t that time8 the job had been assigned I#8"** for direct material and I9** for direct labor+ ,t the end of 5uly8 5ob K%&1had not been completed> all others had+ 3rin as'ed Heather several 7uestions to determine whether sheunderstood the job order system+

Re2ired3 Help Heather answer the following 7uestions/

a+ What is the predetermined overhead rate used by ,4 ompany?

b+ What was the total cost of beginning Wor' in <rocess inventory?

c+ What was total prime cost incurred for the month of 5uly?

d+ What was cost of goods manufactured for 5uly?

,-./

a+ Ase any job started in 5uly/

(ate 5 * / $670 $!7! 5 !&9: 3ost

9: 3;< $!00

b+ 9* $4,"00

9: #00

,0"! =$#00 × !&>

$6,2"!

c+ .rime 3ost 59* ? 9:

9* 5 $8!,6"# 4,"00 5 $8,""#

9: 5 4,0#0 #00 5 ",#0

$#4,!2#

d+ 31* 5 $#,62 ? 22,204 ? ,48 ? 0,7#8 5 $44,04

0/ 3asy O45/ #)#

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9+ <erry ompany uses a job order costing system and has the following information for the first wee' of 5une/

1+ irect labor and direct materials used/

5ob -o+ irect :aterial irect Labor Hours4#8 $,!00 6

!06 #60 6

!07 4! 8!08 "4! 42

!0# 6!2 24

! "08 0

!2 8"! "0

<otal $!,0! 2!6

2+ 6he direct labor wage rate is I# per hour+

"+ 6he overhead rate is I$ per direct labor hour+

#+ ,ctual overhead costs for the wee'8 I18#(*+

$+ 5obs completed/ -os+ #9(8 $*%8 and $*9+

%+ 6he factory had no wor' in process at the beginning of the wee'+

Re2ired3

a+ <repare a summary that will show the total cost assigned to each job+

b+ ompute the amount of overhead over) or underapplied during the wee'+

c+ alculate the cost of the wor' in process at the end of the wee'+

,-./a+ 5ob -o+ : L OH 6otal 4#8 $,!00 $ 464 $ !80 $2,!44

!06 #60 64 80 ,04

!07 4! 72 #0 !77

!08 "4! 68 20 72"

!0# 6!2 #6 20 868

! "08 40 !0 "#8

!2 8"! 20 !0 ,0!

$!,0! $,024 $,280 $7,"#

b+ ,ctual :OH $,480

,pplied :OH ,280

Anderapplied $ 200

c+ 5O4 $*& $ !77

$*( 72"

$11 "#8

$12 ,0!

3nding W< $2,80"

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d+ :anufacturing Overhead ,llocated during 5anuarye+ 4alance8 Wages <ayable ontrol8 ecember "18 2*#f+ 4alance8 Wor' in <rocess nventory ontrol8 5anuary "18 2*$g+ 4alance8 Wor' in <rocess nventory ontrol8 ecember "18 2*#h+ 4alance8 0inished ;oods nventory ontrol8 5anuary "18 2*$i+ :anufacturing Overhead underapplied or overapplied for 5anuary

,-./

a+ I1$8*** U <urchases ) I2*8*** S I9*8***+ <urchases S I9$8***

b+ I2*8*** U I1(*8*** ) I1$8*** S I1($8***

c+ L S I28*** S I1%FHE × 28$** HE. S I#*8***

12$

d+ I%**8*** S 1$* L cost × I#*8*** S I%*8***

I#**8***

e+ 43;- U I$*8*** ) I$28*** S I"8*** 43;- S I$8***

f+ I28*** U I28*** × 1$*@ U I(8*** S I1"8***

g+ 43;- U I9*8*** U I#*8*** U I%*8*** ) I1(*8*** S I1"8*** 43;- S I"8***

h+ I2*8*** U I1(*8*** ) I1($8*** S 3- S I1$8***

i+ ,<<L3 I%*8***,6A,L $&8***

I "8*** overapplied


1#(

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11+ 4eauty ompany manufactures picture frames of all siBes and shapes and uses a job order costingsystem+ 6here is always some spoilage in each production run+ 6he following costs relate to the currentrun/

3stimated overhead eDclusive of spoilage@ $60,000

.poilage estimated@ $ 2!,000

.ales value of spoiled frames $ ,!00

Labor hours 00,000

6he actual cost of a spoiled picture frame is I&+**+ uring the year 1&* frames are considered spoiled+3ach spoiled frame can be sold for I#+ 6he spoilage is considered a part of all jobs+

a+ Labor hours are used to determine the predetermined overhead rate+ What is the predeterminedoverhead rate per direct labor hour?

b+ <repare the journal entry needed to record the spoilage+c+ <repare the journal entry if the spoilage relates only to 5ob K12 rather than being a part of all

production runs+

,-./

a+ I1%*8*** U I2$8*** ) I118$** S I1&"8$**I1&"8$**F1**8*** S I1+&"$ per LH

b+ isposal Nalue of .poiled Wor' 680

:anufacturing Overhead !0

Wor' in <rocess nventory ,#0

c+ isposal Nalue of .poiled Wor' 680

Wor' in <rocess nventory)5ob K12 680

0/ :oderate O45/ #)(

Documents

chapter-4 TB 11232015