CHAPTER 15

JOB ORDER COSTING

CHAPTER LEARNING OBJECTIVES

1. Describe cost systems and the flow of costs in a job order system. Cost accounting involves the procedures for measuring, recording, and reporting product costs. From the data accumulated, companies determine the total cost and the unit cost of each product. The two basic types of cost accounting systems are process cost and job order cost. In job order costing, companies first accumulate manufacturing costs in three accounts: Raw Materials Inventory, Factory Labor, and Manufacturing Overhead. They then assign the accumulated costs to Work in Process Inventory and eventually to Finished Goods Inventory and Cost of Goods Sold.

2. Use a job cost sheet to assign costs to Work in Process. A job cost sheet is a form used to record the costs chargeable to a specific job and to determine the total and unit costs of the completed job. Job cost sheets constitute the subsidiary ledger for the Work in Process Inventory control account.

3. Demonstrate how to determine and use the predetermined overhead rate. The predetermined overhead rate is based on the relationship between estimated annual overhead costs and estimated annual operating activity. This is expressed in terms of a common activity base, such as direct labor cost, direct labor hours, or machine hours. Companies use this rate to assign overhead costs to Work in Process and to specific jobs.

4. Prepare entries for manufacturing and service jobs completed and sold. When jobs are completed, companies debit the cost to Finished Goods Inventory and credit it to Work in Process Inventory. When a job is sold the entries are: (a) Debit Cash or Accounts Receivable and credit Sales Revenue for the selling price, and (b) Debit Cost of Goods Sold and credit Finished Goods Inventory for the cost of the goods.

5. Distinguish between under- or overapplied manufacturing overhead. Underapplied manufacturing overhead indicates that the overhead assigned to Work in Process is less than the overhead incurred. Overapplied overhead indicates that the overhead assigned to Work in Process is greater than the actual overhead costs incurred.

TRUE-FALSE STATEMENTS

1. Cost accounting is primarily concerned with accumulating information about product costs.

2. A job order cost system is most appropriate when a large volume of uniform products is produced.

3. A process cost system is appropriate for similar products that are continuously mass produced.

4. The perpetual inventory method cannot be used in a job order cost system.

5. A job order cost system and a process cost system are two alternative methods for accumulating product costs.

6. A job order cost system identifies costs with a particular job rather than with a set time period.

7. A company may use either a job order cost system or a process cost system, but not both.

8. Raw Materials Inventory, Factory Labor, and Manufacturing Overhead are all control accounts in the general ledger when a job order cost accounting system is used.

9. Accumulating and assigning manufacturing costs are two important activities in a job order cost system.

10. Recording the acquisition cost of raw materials is a part of accumulating manufacturing costs.

11. Manufacturing costs are generally incurred in one period and recorded in a subsequent period.

12. The Purchases account is credited for all returns and allowances of raw materials purchases

13. When raw materials are received, there is no effort at this point to associate the cost of materials with specific jobs.

14. When raw materials are purchased, the Work in Process Inventory account is debited.

15. Factory labor should be assigned to selling and administrative expenses on a proportionate basis.

16. Benefits and payroll taxes associated with factory workers should be accumulated as a part of Factory Labor.

17. Job order cost sheets constitute the subsidiary ledger of the control account Work in Process Inventory.

18. In a job order cost system, each entry to the Work in Process Inventory account should be accompanied by a posting to one or more job cost sheets.

19. Direct materials requisitioned from the storeroom should be charged to the Work in Process Inventory account and the job cost sheets for the individual jobs on which the materials were used.

20. Manufacturing overhead is the only product cost that can be assigned to jobs as soon as the costs are incurred.

21. There should be a separate job cost sheet for each job.

22. Actual manufacturing overhead costs are assigned to each job by tracing each overhead cost to a specific job.

23. The calculation for the predetermined overhead rate is estimated annual overhead costs divided by an estimated volume of annual operating activity.

24. Actual manufacturing overhead costs should be charged to the Work in Process Inventory account as they are incurred.

25. Finished Goods Inventory is decreased for the cost of jobs completed during a period.

26. Finished Goods Inventory is charged for the cost of jobs completed during a period.

27. When goods are sold, the Cost of Goods Sold account is debited and Work in Process Inventory account is credited.

28. Total manufacturing costs for a period consists of the cost of direct materials used, the cost of direct labor incurred, and the manufacturing overhead applied during the period.

29. Overapplied overhead means that actual manufacturing overhead costs were greater than the manufacturing overhead costs applied to jobs.

30. At the end of the year, the amount of the overapplied overhead is usually credited to Cost of Goods Sold.

31. A cost accounting system consists of manufacturing cost accounts that are fully integrated into the general ledger of a company.

32. The cost of raw materials purchased is credited to Raw Materials Inventory when materials are received.

33. Requisitions for direct materials are posted daily to the individual job cost sheets.

34. The predetermined overhead rate is based on the relationship between the estimated annual overhead costs and the estimated annual operating activity expressed in terms of a common activity base.

35. At the end of the year, underapplied overhead is usually credited to Cost of Goods Sold.

MULTIPLE CHOICE QUESTIONS

36. Which of the following is one of the purposes of cost accounting?

a. It involves measuring product costs.

b. It involves the determination of company profits.

c. It requires GAAP to be applied.

d. It requires cost minimizing principles.

37. A major purpose of cost accounting is to

a. classify all costs as operating or nonoperating.

b. measure, record, and report period costs.

c. provide information to stockholders for investment decisions.

d. measure, record, and report product costs.

38. The two basic types of cost accounting systems are

a. job order cost and job cost accumulation systems.

b. job order cost and process cost systems.

c. process cost and batch cost systems.

d. job order cost and batch cost systems.

39. A process cost system would most likely be used by a company that makes

a. music videos.

b. repairs to electric bicycles.

c. ramen noodles.

d. college graduation announcements.

40. Which of the following would be accounted for using a job order cost system?

a. The production of computer docking stations.

b. The production of electric cars.

c. The refining of petroleum.

d. The construction of a new campus dormitory.

41. Process costing is used when

a. the production process is continuous.

b. production is aimed at filling a specific customer order.

c. dissimilar products are involved.

d. costs are to be assigned to specific jobs.

42. Process costing is not used when

a. similar goods are being produced.

b. large volumes are produced.

c. jobs have distinguishing characteristics.

d. a series of connected manufacturing processes is necessary.

43. An important feature of a job order cost system is that each job

a. must be similar to previous jobs completed.

b. has its own distinguishing characteristics.

c. must be completed before a new job is accepted.

d. consists of one unit of output.

44. As of December 31, 2022, Stand Still Industries had $2,500 of raw materials inventory. At the beginning of 2022, there was $2,000 of materials on hand. During the year, the company purchased $375,000 of materials; however, it paid for only $312,500. How much inventory was requisitioned for use on jobs during 2022?

a. $312,000

b. $374,500

c. $375,500

d. $313,000

45. The flow of costs in a job order cost system

a. involves accumulating manufacturing costs incurred and assigning the accumulated costto work done.

b. cannot be measured until all jobs are complete.

c. measures product costs for a set time period.

d. generally follows a LIFO cost flow assumption.

46. In a job order cost system, the Work in Process Inventory account is

a. an expense.

b. a control account.

c. not used.

d. a period cost.

47. When a job is completed and all costs have been accumulated on a job cost sheet, the journal entry that should be made is

a. Finished Goods Inventory

Direct Materials

Direct Labor

Manufacturing Overhead

b. Work in Process Inventory

Direct Materials

Direct Labor

Manufacturing Overhead

c. Raw Materials Inventory

Work in Process Inventory

d. Finished Goods Inventory

Work in Process Inventory

48. The two major steps in the flow of costs are

a. allocating and assigning.

b. acquiring and accumulating.

c. accumulating and assigning.

d. accumulating and amortizing.

49. The Raw Materials Inventory account is

a. a subsidiary account.

b. debited for invoice costs and freight costs charged to the purchaser.

c. debited for purchase discounts taken.

d. debited for purchase returns and allowances.

50. Records of individual items of raw materials would not be maintained

a. electronically.

b. manually.

c. on stores ledger cards.

d. in the Raw Materials Inventory account.

51. The cost of raw materials is debited to Raw Materials Inventory when the

a. materials are ordered.

b. materials are received.

c. materials are put into production.

d. bill for the materials is paid.

52. Which of the following is not included in factory labor costs?

a. Gross earnings.

b. Employer payroll taxes.

c. Employee benefits.

d. All of these are included in factory labor costs.

53. All of the following would be entries in assigning accumulated costs to the Work in Process Inventory except

a. the purchase of raw materials.

b. raw materials are used.

c. overhead is applied.

d. factory labor is used.

54. Factory labor costs

a. are accumulated in a control account.

b. do not include pension costs.

c. include vacation pay.

d. are based on workers’ net pay.

55. Factory Labor is a(n)

a. expense account.

b. control account.

c. subsidiary account.

d. temporary account.

56. Kline Manufacturing has the following labor costs:

Factory—Gross wages $500,000

Factory—Net wages 420,000

Employer Payroll Taxes Payable 50,000

The entry to record the cost of factory labor and the associated payroll tax expense will include a debit to Factory Labor for

a. $550,000.

b. $500,000.

c. $470,000.

d. $450,000.

57. Factory labor costs

a. accumulate in advance of utilization.

b. accumulate in a control account.

c. include sick pay earned by factory workers.

d. accumulate in the Factory Labor Expense account.

58. Which of the following is not a control account?

a. Finished Goods Inventory

b. Raw Materials Inventory

c. Work in Process Inventory

d. All of these are control accounts

59. Manufacturing Overhead does not include amounts paid for

a. factory utilities.

b. property taxes on the manufacturing facility.

c. supervisor labor costs.

d. the CEO’s salary.

60. The entry to record the acquisition of raw materials on account is

a. Work in Process Inventory

Accounts Payable

b. Manufacturing Overhead

Raw Materials Inventory

Accounts Payable

c. Accounts Payable

Raw Materials Inventory

d. Raw Materials Inventory

Accounts Payable

61. Which one of the following best describes a job cost sheet?

a. It is a form used to record the costs chargeable to a specific job and to determine the total and unit costs of the completed job.

b. It is used to track manufacturing overhead costs to specific jobs.

c. It is used by management to understand how direct costs affect profitability.

d. It is a daily form that management uses for tracking worker productivity on which employee raises are based.

62. Job cost sheets constitute the subsidiary ledger for the

a. Finished Goods Inventory account.

b. Cost of Goods Sold account.

c. Work in Process Inventory account.

d. Cost of Goods Manufactured account.

63. A materials requisition slip shows that direct materials requisitioned were $66,000 and indirect materials requisitioned were $9,000. The entry to record the transfer of materials from the storeroom is

a. Work in Process Inventory 66,000

Raw Materials Inventory 66,000

b. Direct Materials 66,000

Indirect Materials 9,000

Work in Process Inventory 75,000

c. Manufacturing Overhead 75,000

Raw Materials Inventory 75,000

d. Work in Process Inventory 66,000

Manufacturing Overhead 9,000

Raw Materials Inventory 75,000

64. The job cost sheet does not show

a. costs chargeable to a specific job.

b. the total costs of a completed job.

c. the unit cost of a completed job.

d. the cost of goods sold.

65. Under an effective system of internal control, the authorization for issuing materials is made

a. orally.

b. on a prenumbered materials requisition slip.

c. by the accounting department.

d. by anyone on the production line.

66. A copy of the materials requisition slip would not include the

a. quantity.

b. stock number.

c. cost per unit.

d. name of the supplier.

67. Materials requisition slips are costed

a. by production supervisors.

b. by factory personnel who work on the production line.

c. after the goods have been sold.

d. using any of the inventory costing methods.

68. Postings to control accounts in a costing system are made

a. monthly.

b. daily.

c. annually.

d. when errors are discovered

69. Which one of the following should be equal to the balance of the Work in Process Inventory account at the end of the period?

a. The total of the amounts transferred from raw materials for the current period

b. The sum of the costs shown on the job cost sheets for unfinished jobs

c. The total of manufacturing overhead applied to Work in Process for the period

d. The total manufacturing costs for the period

70. Which of the following shows entries only to control accounts?

a. Factory Labor

Factory Wages Payable

b. Work in Process Inventory

Factory Labor

Raw Materials Inventory

Factory Wages Payable

c. Work in Process Inventory

Manufacturing Overhead

Raw Materials Inventory

d. All of these entries include control accounts.

71. A time ticket does not indicate the

a. employee's name.

b. account to be charged.

c. number of personal exemptions claimed by the employee.

d. job number.

72. Which one of the following is a source document that impacts the job cost sheet?

a. Raw materials receiving slips.

b. Materials purchase orders.

c. Labor time tickets.

d. Finished goods shipping documents.

73. Time tickets should be approved by

a. the audit committee.

b. co-workers.

c. the employee's supervisor.

d. the payroll department.

74. If the entry to assign factory labor shows only a debit to Work in Process Inventory, then all labor costs were

a. direct labor.

b. indirect labor.

c. overtime related.

d. regular hours.

75. The principal accounting record used in assigning costs to jobs is

a. the job cost sheet.

b. the cost of goods manufactured schedule.

c. the Manufacturing Overhead control account.

d. the stores ledger cards.

76. The following information is available for completed Job No. 402: Direct materials, $120,000; direct labor, $180,000; manufacturing overhead applied, $90,000; units produced, 5,000 units; units sold, 4,000 units. The cost of the finished goods inventory on hand from this job is

a. $60,000.

b. $390,000.

c. $78,000.

d. $312,000.

77. Sportly, Inc. completed Job No. B14 during 2022. The job cost sheet listed the following:

Direct materials $110,000

Direct labor $60,000

Manufacturing overhead applied $40,000

Units produced 3,000 units

Units sold 1,800 units

What is the cost of the finished goods inventory on hand from this job?

a. $210,000

b. $126,000

c. $ 84,000

d. $102,000

78. Madison Inc. uses job order costing for its line of dual zone wine refrigerators. The cost incurred for production during 2022 totaled $18,000 of materials, $9,000 of direct labor costs, and $6,000 of manufacturing overhead applied. The company ships the refrigerators as soon as they are completed which results in no finished goods inventory on hand at the end of any year. Beginning Work in Process inventory totaled $15,000, and the ending balance is $9,000. During the year, the company completed 25 refrigerators. What is the cost per refrigerator?

a. $1,080

b. $1,560

c. $1,320

d. $1,920

79. As of December 31, 2022, Nilsen Industries had $2,000 of raw materials inventory. At the beginning of 2022, there was $1,600 of materials on hand. During the year, the company purchased $354,000 of materials; however it paid for only $314,000. How much inventory was requisitioned for use on jobs during 2022?

a. $354,400

b. $344,400

c. $352,600

d. $353,600

80. Cost of goods manufactured equals $85,000 for 2022. Finished goods inventory is $2,000 at the beginning of the year and $5,500 at the end of the year. Beginning and ending Work in Process inventory for 2022 are $4,000 and $5,000, respectively. How much is cost of goods sold for the year?

a. $87,500

b. $83,000

c. $81,500

d. $80,500

81. A company estimated its annual overhead costs to be $1,500,000 and direct labor costs to be $1,000,000. Actual overhead was $1,450,000, and actual labor costs totaled $1,100,000. What is the company’s predetermined overhead rate (rounded to the nearest cent)?

a. $1.45

b. $1.32

c. $1.50

d. $1.36

82. Vektek, Inc. considers machine hours to be the best activity base for applying its manufacturing overhead. In the current period, the estimate of annual overhead costs for its jobs was $2,050,000. The company used 1,000 hours of processing on Job No. B12 during the period and incurred overhead costs totaling $2,100,000. The budgeted machine hours for the year totaled 20,000. How much overhead should be applied to Job No. B12?

a. $2,100

b. $102,500

c. $105,000

d. $2,050

83. Barr Mfg. provided the following information from its accounting records for 2022:

Estimated production 60,000 labor hours

Actual production 56,000 labor hours

Estimated overhead $900,000

Actual overhead $870,000

What is the overhead application rate if Barr bases the rate on direct labor hours (rounded to the nearest cent)?

a.$16.07 per hour

b.$15.00 per hour

c.$14.50 per hour

d.$15.54 per hour

84. Kinney Company applies overhead on the basis of 150% of direct labor cost. Job No. 176 is charged with $150,000 of direct materials costs and $180,000 of manufacturing overhead. The total manufacturing costs for Job No. 176 is

a. $430,000.

b. $600,000.

c. $450,000.

d. $405,000.

85. Redman Company manufactures customized sit-stand desks. The following pertains to Job No. 978:

Direct materials used $15,450

Direct labor hours worked 360

Direct labor rate per hour $15.00

Machine hours used 300

Applied factory overhead rate per machine hour $22.00

What is the total manufacturing cost for Job No. 978?

a. $25,650

b. $27,450

c. $28,950

d. $30,750

86. Henson Company applies overhead on the basis of 120% of direct labor cost. Job No. 190 is charged with $140,000 of direct materials costs and $180,000 of manufacturing overhead. The total manufacturing costs for Job No. 190 is

a. $320,000.

b. $536,000.

c. $488,000.

d. $470,000.

87. Norman Company manufactures customized metal buildings. The following pertains to Job No. 953:

Direct materials used $22,800

Direct labor hours worked 600

Direct labor rate per hour $16.00

Machine hours used 400

Applied factory overhead rate per machine hour $30.00

What is the total manufacturing cost for Job No. 953?

a. $41,200

b. $44,400

c. $47,200

d. $50,400

88. Minton Company provided the following information from its accounting records for 2022:

Estimated production 60,000 labor hours

Actual production 56,000 labor hours

Estimated overhead $1,800,000

Actual overhead $1,740,000

What is the predetermined overhead application rate if Minton Company bases it on direct labor hours (rounded to the nearest cent)?

a. $30.00 per hour

b. $29.00 per hour

c. $32.14 per hour

d. $31.07 per hour

89. The labor costs that have been identified as indirect labor should be charged to

a. manufacturing overhead.

b. direct labor.

c. the individual jobs worked on.

d. salary expense.

90. Manufacturing overhead is applied to each job

a. at the time when the overhead cost is incurred.

b. by means of a predetermined overhead rate.

c. at the end of the year when actual costs are known.

d. only if the overhead costs can be directly traced to that job.

91. The predetermined overhead rate is based on the relationship between

a. estimated annual costs and actual activity.

b. estimated annual costs and estimated annual activity.

c. actual monthly costs and actual annual activity.

d. estimated monthly costs and actual monthly activity.

92. The predetermined overhead rate is

a. determined on a moving average basis throughout the year.

b. not calculated until actual overhead costs are incurred.

c. determined at the beginning of the year.

d. determined at the end of the current year.

93. In calculating a predetermined overhead rate, a trend in automated manufacturing operations is to choose an activity base related to

a. direct labor hours.

b. indirect labor dollars.

c. machine hours.

d. raw materials dollars.

94. Annual overhead costs are estimated to be $750,000 and direct labor costs are estimated to be $1,000,000. If the activity base is direct labor costs,

a. $1.33 is the predetermined overhead rate.

b. for every dollar of manufacturing overhead, 75 cents of direct labor cost will be assigned.

c. for every dollar of direct labor cost, 75 cents of manufacturing overhead will be assigned.

d. a predetermined overhead rate cannot be determined.

95. Overhead application is recorded with a

a. credit to Work in Process Inventory.

b. credit to Manufacturing Overhead.

c. debit to Manufacturing Overhead.

d. credit to job cost sheets.

96. Manufacturing overhead applied is added to direct labor incurred and to what other item to equal total manufacturing costs for the period?

a. Goods available for sale

b. Raw materials purchased

c. Work in Process inventory

d. Direct materials used

97. Simmons Inc. applies overhead to production at a predetermined rate of 90% of direct labor cost. Job No. 250, the only job still in process at the end of August, has been charged with manufacturing overhead of $8,100. What was the amount of direct materials charged to Job 250 if the balance in Work in Process Inventory is $30,000?

a. $8,100

b. $9,000

c. $12,900

d. $14,610

98. Spencer Inc. applies overhead to production at a predetermined rate of 80% of direct labor cost. Job No. 130, the only job still in process at the end of August, has been charged with manufacturing overhead of $6,400. What was the amount of direct materials charged to Job 130 if the balance in Work in Process Inventory is $20,000?

a. $7,000

b. $6,400

c. $5,600

d. $8.480

99. For Jacobs Company, the predetermined overhead rate is 70% of direct labor cost. During the month, $600,000 of factory labor costs are incurred of which $140,000 is indirect labor. Actual overhead incurred was $320,000. The amount of overhead debited to Work in Process Inventory should be

a. $322,000.

b. $320,000.

c. $420,000.

d. $460,000.

100. Simpson Company applies overhead on the basis of 200% of direct labor cost. Job No. 305 is charged with $180,000 of direct materials costs and $200,000 of manufacturing overhead. The total manufacturing cost for Job No. 305 is

a. $380,000.

b. $480,000.

c. $560,000.

d. $580,000.

101. For Wilton Company, the predetermined overhead rate is 70% of direct labor cost. During the month, $720,000 of factory labor costs are incurred of which $200,000 is indirect labor. Actual overhead incurred was $360,000. The amount of overhead charged to Work in Process Inventory is

a. $364,000.

b. $360,000.

c. $504,000.

d. $520,000

102. At the beginning of the year, Monroe Company estimates annual overhead costs to be $2,400,000 and that 300,000 machine hours will be operated. Machine hours is the overhead allocation base. What is the amount of overhead applied during the year if actual machine hours for the year was 315,000 hours?

a. $2,400,000

b. $2,285,714

c. $1,680,000

d. $2,520,000

103. Cost of goods sold is obtained from

a. analysis of all the control accounts in the cost system.

b. the Finished Goods Inventory records.

c. the Work in Process Inventory records.

d. the Raw Materials Inventory control account.

104. When determining costs of jobs, how does a company account for the cost of indirect materials?

a. The cost is added to Work in Process inventory as used.

b. The cost remains part of Raw Materials Inventory.

c. The cost is transferred out of Raw Materials Inventory and into manufacturing overhead when used.

d. The cost is transferred out of Raw Materials Inventory and into Work in Process inventory as used.

105. In a job order cost system, a credit to Manufacturing Overhead will be accompanied by a debit to

a. Cost of Goods Manufactured.

b. Finished Goods Inventory.

c. Work in Process Inventory.

d. Raw Materials Inventory.

106. During 2022, Tanner Manufacturing estimated that Job No. 26 would incur $300,000 of overhead, $500,000 of materials, and $200,000 in labor. Tanner applied overhead based on direct labor cost. Actual production required an overhead cost of $290,000, $550,000 in materials used, and $220,000 in labor. All of the goods were completed. What amount was transferred to Finished Goods Inventory?

a. $1,000,000

b. $1,060,000

c. $1,070,000

d. $1,100,000

107. Debits to Work in Process Inventory are accompanied by credits to all but which one of the following accounts?

a. Raw Materials Inventory

b. Factory Labor

c. Manufacturing Overhead

d. Cost of Goods Sold

108. Which of the following is not viewed as part of accumulating manufacturing costs in a job order cost system?

a. Cost of goods sold is recognized.

b. Raw materials are purchased.

c. Factory labor is incurred.

d. Manufacturing overhead is incurred.

109. Which of the following is not viewed as part of assigning manufacturing costs in a job order cost system?

a. Manufacturing overhead is applied.

b. Raw materials are used.

c. Manufacturing overhead is incurred.

d. Completed goods are recognized.

110. In determining total manufacturing costs on the cost of goods manufactured schedule,

a. beginning Work in Process Inventory should have a zero balance.

b. actual manufacturing overhead costs appear as a deduction.

c. manufacturing overhead applied is added to direct materials and direct labor.

d. ending Work in Process inventory is deducted from beginning Work in Process Inventory.

111. Gulick Company developed the following data for the current year:

Beginning Work in Process Inventory $240,000

Direct materials used 144,000

Actual overhead 288,000

Overhead applied 216,000

Cost of goods manufactured 264,000

Total manufacturing costs 720,000

Gulick Company's direct labor cost for the year is

a. $72,000.

b. $360,000.

c. $216,000.

d. $288,000.

112. Gulick Company developed the following data for the current year:

Beginning Work in Process Inventory $240,000

Direct materials used 144,000

Actual overhead 288,000

Overhead applied 216,000

Cost of goods manufactured 264,000

Total manufacturing costs 720,000

Gulick Company's ending Work in Process Inventory is

a. $696,000.

b. $480,000.

c. $456,000.

d. $216,000.

113. Hayward Manufacturing Company developed the following data:

Beginning Work in Process Inventory $900,000

Direct materials used 700,000

Actual overhead 1,100,000

Overhead applied 800,000

Cost of goods manufactured 1,200,000

Ending Work in Process Inventory 1,500,000

Hayward Manufacturing Company's total manufacturing costs for the period is

a. $1,900,000.

b. $1,800,000.

c. $1,300,000.

d. cannot be determined from the data provided.

114. Which of the following is not used in assigning manufacturing costs to Work in Process Inventory?

a. Actual manufacturing overhead

b. Time tickets

c. Materials requisitions

d. Predetermined overhead rate

115. On the cost of goods manufactured schedule, the cost of goods manufactured agrees with the

a. balance of Finished Goods Inventory at the end of the period.

b. total debits to Work in Process Inventory during the period.

c. amount transferred from Work in Process Inventory to Finished Goods Inventory during the period.

d. debits to Cost of Goods Sold during the period.

116. Gannon Company had the following information at December 31:

Finished goods inventory, January 1 $ 50,000

Finished goods inventory, December 31 150,000

If the cost of goods manufactured during the year amounted to $2,200,000 and annual sales were $2,750,000, the amount of gross profit for the year is

a. $550,000.

b. $2,100,000.

c. $650,000.

d. $450,000.

117. Haight Company incurred direct materials costs of $2,500,000 during the year. Manufacturing overhead applied was $450,000 and is applied at the rate of 60% of direct labor costs. Haight Company’s total manufacturing costs for the year was

a. $3,700,000.

b. $3,220,000.

c. $2,950,000.

d. $4,720,000.

118. Greer Company developed the following data for the current year:

Beginning Work in Process Inventory $136,000

Direct materials used 208,000

Actual overhead 176,000

Overhead applied 184,000

Cost of goods manufactured 900,000

Total manufacturing costs 856,000

What is Greer Company's direct labor cost for the year?

a. $508,000

b. $600,000

c. $464,000

d. $472,000

119. Greer Company developed the following data for the current year:

Beginning Work in Process inventory $136,000

Direct materials used 208,000

Actual overhead 176,000

Overhead applied 184,000

Cost of goods manufactured 900,000

Total manufacturing costs 856,000

What is Greer Company's ending Work in Process Inventory for the year?

a. $92,000

b. $484,000

c. $84,000

d. $372,000

120. Chomelar Manufacturing Company developed the following data:

Beginning Work in Process inventory $ 120,000

Direct materials used 720,000

Actual overhead 840,000

Overhead applied 810,000

Cost of goods manufactured 1,920,000

Ending Work in Process inventory 90,000

What are total manufacturing costs for the period?

a. $2,370,000

b. $1,890,000

c. $1,650,000

d. $1,830,000

121. Barger Company had the following information at December 31:

Finished goods inventory, January 1 $ 90,000

Finished goods inventory, December 31 126,000

If the cost of goods manufactured during the year totaled $1,895,000 and annual sales were $2,994,000, what is the company’s gross profit for the year?

a. $1,099,000

b. $1,063,000

c. $1,859,000

d. $1,135,000

122. Emley Company incurred direct materials cost of $750,000 during the year. Manufacturing overhead applied was $700,000 and is applied based on direct labor costs. The predetermined overhead rate is 70%. What are Emley Company’s total manufacturing costs for the year?

a. $1,940,000

b. $1,750,000

c. $1,450,000

d. $2,450,000

123. During 2022, Durham Manufacturing expected Job No. 51 to incur $300,000 of overhead, $500,000 of direct materials, and $200,000 in direct labor. Durham applied overhead based on direct labor cost. Actual production required overhead cost of $295,000, $570,000 in direct materials used, and $220,000 in direct labor. All of the goods were completed. What amount was transferred to Finished Goods Inventory?

a. $1,090,000

b. $1,120,000

c. $1,000,000

d. $1,085,000

124. During 2022, Cotte Manufacturing expected Job No. 59 to incur $300,000 of overhead cost, $500,000 of direct materials cost, and $200,000 in direct labor cost. Cotte applied overhead based on direct labor cost. Actual production required overhead cost of $295,000, $570,000 in direct materials used, and $220,000 in direct labor. All of the goods were completed. What is the amount of over- or underapplied overhead?

a. $5,000 underapplied

b. $5,000 overapplied

c. $35,000 underapplied

d. $35,000 overapplied

125. Kimble Company applies overhead on the basis of machine hours. Given the following data, what is the overhead applied and the under- or overapplication of overhead for the period?

Estimated annual overhead cost $1,600,000

Actual annual overhead cost $1,575,000

Estimated machine hours 400,000

Actual machine hours 390,000

a. $1,560,000 applied and $15,000 overapplied

b. $1,600,000 applied and $15,000 overapplied

c. $1,560,000 applied and $15,000 underapplied

d. $1,575,000 applied and neither under-nor overapplied

126. Barnes Company applies overhead on the basis of machine hours. Given the following data, what is the overhead applied and the under- or overapplication of overhead for the period?

Estimated annual overhead cost $3,000,000

Actual annual overhead cost $2,970,000

Estimated machine hours 300,000

Actual machine hours 295,000

a. $2,950,000 applied and $20,000 overapplied

b. $3,000,000 applied and $20,000 overapplied

c. $2,950,000 applied and $20,000 underapplied

d. $2,970,000 applied and neither under- nor overapplied

127. A company assigned overhead to Work in Process Inventory. At year end, what does it mean if overhead is overapplied?

a. The overhead assigned to Work in Process Inventory is greater than the estimated overhead costs.

b. The overhead assigned to Work in Process Inventory is less than the estimated overhead costs.

c. The overhead assigned to Work in Process Inventory is less than the actual overhead.

d. The overhead assigned to Work in Process Inventory is greater than the overhead incurred.

128. If the Manufacturing Overhead account has a debit balance at the end of a period, it means that

a. actual overhead costs were less than overhead costs applied to jobs.

b. actual overhead costs were greater than overhead costs applied to jobs.

c. actual overhead costs were equal to overhead costs applied to jobs.

d. no jobs have been completed.

129. If the manufacturing overhead cost applied to jobs is greater than the actual manufacturing costs incurred during a period, overhead is said to be

a. underapplied.

b. overapplied.

c. in error.

d. prepaid.

130. At the end of the year, any balance in the Manufacturing Overhead account is generally eliminated by adjusting

a. Work in Process Inventory.

b. Finished Goods Inventory.

c. Cost of Goods Sold.

d. Raw Materials Inventory.

131. If Manufacturing Overhead has a credit balance at the end of the period, then

a. overhead has been underapplied.

b. the overhead assigned to Work in Process Inventory is less than the overhead incurred.

c. overhead has been overapplied.

d. management must take corrective action.

132. The Manufacturing Overhead account shows debits of $30,000, $24,000, and $28,000 and a credit for $86,000. Based on this information, manufacturing overhead

a. has been overapplied.

b. has been underapplied.

c. has not been applied.

d. shows a zero balance.

133. If Manufacturing Overhead has a debit balance at the end of the period, then

a. overhead has been underapplied.

b. the overhead assigned to Work in Process Inventory is more than the overhead incurred.

c. overhead has been overapplied.

d. management must take corrective action.

134. If actual manufacturing is greater than applied manufacturing overhead, then manufacturing overhead is

a. underapplied.

b. overapplied.

c. a loss on the income statement under "Other Expenses and Losses."

d. considered a miscellaneous expense.

135. If actual overhead is less than applied manufacturing overhead, then manufacturing overhead is

a. underapplied.

b. overapplied.

c. a loss on the income statement under "Other Expenses and Losses."

d. considered a miscellaneous expense.

136. If manufacturing overhead has been underapplied during the year, the adjusting entry at the end of the year will generally include a

a. debit to Manufacturing Overhead.

b. credit to Cost of Goods Sold.

c. debit to Work in Process Inventory.

d. debit to Cost of Goods Sold.

137. If manufacturing overhead has been overapplied during the year, the adjusting entry at the end of the year will include a

a. debit to Manufacturing Overhead.

b. credit to Finished Goods Inventory

c. debit to Cost of Goods Sold.

d. credit to Work in Process Inventory.

138. The existence of under- or overapplied overhead at the end of the year usually

a. requires an adjustment to Cost of Goods Sold.

b. indicates that an error has been made.

c. requires a retroactive adjustment to the cost of all jobs completed.

d. is written off as a bad estimate expense.

139. Conceptually, any under- or overapplied overhead at the end of the year should be allocated among all of the following accounts except

a. Cost of Goods Sold.

b. Work in Process Inventory.

c. Raw Materials Inventory.

d. Finished Goods Inventory.

140. If manufacturing overhead has been overapplied at the end of the year, it means that

a. actual overhead costs were greater than the overhead assigned to jobs.

b. actual overhead costs were less than the overhead assigned to jobs.

c. overhead has not been applied to jobs still in process.

d. cost of goods will have to be increased by the amount of the overapplied overhead.

141. A process cost system would be used for all of the following except the

a. manufacture of energy bars.

b. refining of petroleum.

c. production of custom skateboards.

d. production of microphones.

142. In a job order cost system, the purchase of raw materials is recorded with a debit to

a. Work in Process Inventory.

b. Work in Process Inventory and Manufacturing Overhead.

c. Raw Materials Inventory.

d. Finished Goods Inventory.

143. In a manufacturing company, the cost of factory labor includes all of the following costs except

a. employer payroll taxes.

b. employee benefits incurred by the employer.

c. net earnings of factory workers.

d. gross earnings of factory workers.

144. When direct labor costs are assigned to jobs, _______ is debited and _________ is credited. ,

a. Work in Process Inventory; Salaries and Wages Payable

b. Work in Process Inventory; Factory Labor

c. Manufacturing Overhead; Factory Labor

d. Factory Labor; Manufacturing Overhead

145. When the company assigns factory labor costs to jobs, direct labor cost is debited to

a. Direct Labor.

b. Factory Labor.

c. Manufacturing Overhead.

d. Work in Process Inventory.

146. Jinnah Company applies overhead on the basis of 200% of direct labor cost. Job No. 501 is charged with $240,000 of direct materials cost and $320,000 of manufacturing overhead. The total manufacturing cost for Job No. 501 is

a. $560,000.

b. $880,000.

c. $720,000.

d. $800,000.

147. Companies assign manufacturing overhead to Work in Process Inventory on an estimated basis through the use of a(n)

a. actual overhead rate.

b. estimated overhead rate.

c. assigned overhead rate.

d. predetermined overhead rate.

148. Overapplied manufacturing overhead exists when overhead assigned to Work in Process Inventory is

a. more than overhead incurred and there is a debit balance in Manufacturing Overhead at the end of a period.

b. less than overhead incurred and there is a debit balance in Manufacturing Overhead at the end of a period.

c. more than overhead incurred and there is a credit balance in Manufacturing Overhead at the end of a period.

d. less than overhead incurred and there is a credit balance in Manufacturing Overhead at the end of a period.

149. Usually, under- or overapplied overhead is eliminated with an adjustment to

a. Work in Process Inventory.

b. Finished Goods Inventory.

c. Finished Goods Inventory and Cost of Goods Sold.

d. Cost of Goods Sold.

150. Which of the following statements about under- or overapplied manufacturing overhead is correct?

a. After the entry to transfer over- or underapplied overhead to Cost of Goods Sold is posted, Manufacturing Overhead will have a zero balance.

b. When Manufacturing Overhead has a credit balance, overhead is said to be under-applied.

c. At the end of the year, under- or overapplied overhead is eliminated by a closing entry.

d. When year-end financial statements are prepared, overapplied overhead is reported in current liabilities.

BRIEF Exercises

BE 151

During the first year of operations, Shapiro Tool accumulated the following manufacturing costs:

Raw materials purchased on account $12,000

Factory labor incurred 6,000

Manufacturing overhead incurred on account 4,000

Instructions

Prepare separate journal entries for each manufacturing cost.

Ex. 161

The manufacturing operations of Beatly, Inc. had the following inventory balances for the month of January:

January 1 January 31

Raw Materials $12,000 $13,000

Work in Process 21,000 23,000

Finished Goods 14,000 12,000

Beatly transferred $270,000 of completed goods out of Work in Process Inventory during January.

Instructions

Compute the cost of goods sold for January.

Ex. 162

A selected list of accounts used by Cline Manufacturing Company follows:

Code Code

A Cash F Accounts Payable

B Accounts Receivable G Factory Labor

C Raw Materials Inventory H Manufacturing Overhead

D Work in Process Inventory I Cost of Goods Sold

E Finished Goods Inventory J Sales Revenue

Cline Manufacturing Company uses a job order system and maintains perpetual inventory records.

Instructions

Place the appropriate code letter in the columns indicating the appropriate account(s) to be debited and credited for the transactions listed below.

———————————————————————————————————————————

Account(s) Account(s)

Transactions Debited Credited

———————————————————————————————————————————

1. Raw materials were purchased on account.

———————————————————————————————————————————

2. Issued a check to Dixon Machine Shop for

repair work on factory equipment.

———————————————————————————————————————————

3. Direct materials were requisitioned for Job 280.

———————————————————————————————————————————

4. Factory labor was paid as incurred.

———————————————————————————————————————————

5. Recognized direct labor and indirect labor used.

———————————————————————————————————————————

6. The production department requisitioned indirect

materials for use in the factory.

———————————————————————————————————————————

7. Manufacturing overhead was applied to production

based on a predetermined overhead rate of $8/ labor hour.

———————————————————————————————————————————

8. Goods that were completed were transferred to

finished goods inventory.

———————————————————————————————————————————

9. Goods costing $80,000 were sold for $105,000

on account.

———————————————————————————————————————————

10. Paid for raw materials purchased previously

on account.

———————————————————————————————————————————

Ex. 163

Finn Manufacturing Company uses a job order cost system and keeps perpetual inventory records. Prepare journal entries to record the following transactions during the month of June.

June 1 Purchased raw materials for $20,000 on account.

8 Raw materials requisitioned by production:

Direct materials $8,000

Indirect materials 1,000

15 Paid factory utilities, $2,100 and repairs for factory equipment, $8,000.

25 Incurred $108,000 of factory labor.

25 Time tickets indicated the following:

Direct labor (7,000 hrs. × $12 per hr.) = $ 84,000

Indirect labor (3,000 hrs. × $8 per hr.) = 24,000

$108,000

Ex. 163 (Cont.)

25 Applied manufacturing overhead to production based on a predetermined overhead rate of $7 per direct labor hour worked.

28 Goods costing $18,000 were completed in the factory and were transferred to finished goods inventory.

30 Goods costing $15,000 were sold for $20,000 on account.

Ex. 164

Selected accounts of Kosar Manufacturing Company at year end appear below:

RAW MATERIALS INVENTORY WORK IN PROCESS INVENTORY

(a) 40,000 (d) 25,000 (d) 25,000 (g) 140,000

(e) 80,000

(f) 100,000

FINISHED GOODS INVENTORY COST OF GOODS SOLD

(g) 140,000 (h) 120,000 (h) 120,000

FACTORY LABOR MANUFACTURING OVERHEAD

(b) 110,000 (e) 110,000 (c) 75,000 (f) 100,000

(e) 30,000

Instructions

Explain the probable transaction that took place for each of the items identified by letters in the accounts. For example:

(a) Raw materials costing $40,000 were purchased.

Ex. 165

Sardin Company begins the month of March with $17,000 of Work in Process Inventory from Job 324. Information from job cost sheets shows the following additional costs assigned during March, April, and May of 2022:

Manufacturing Costs Assigned

Job No. March April May

324 $26,000

325 20,000 $28,000 $15,000

326 41,000 11,000

327 16,000 39,000

328 34,000 51,000

Job 324 was completed in March. Jobs 325 and 327 were completed in May, and Job 326 was completed in April. Jobs are sold during the month after completion. Total revenue for jobs sold during the 3-month period is $145,000.

Ex. 165 (Cont.)

Instructions

Calculate the balances of the Work in Process Inventory and Finished Goods Inventory accounts at the end of May.

Ex. 166

The gross earnings of factory workers for Dinkel Company during the month of January are $400,000. The employer's payroll taxes for the factory payroll are $80,000. Of the total accumulated cost of factory labor, 75% is related to direct labor and 25% is attributable to indirect labor.

Instructions

(a) Prepare the entry to record the factory labor costs for the month of January.

(b) Prepare the entry to assign factory labor to production.

(c) Prepare the entry to assign manufacturing overhead to production, assuming the predetermined overhead rate is 125% of direct labor cost.

Ex. 167

Foster Manufacturing uses a job order cost system. On April 1, the company has Work in Process Inventory of $7,600 and two jobs in process: Job No. 221, $3,600, and Job No. 222, $4,000. During April, a summary of source documents reveals the following:

For Materials Requisition Slips Labor Time Tickets

Job No. 221 $1,200 $2,100

222 1,700 2,200

223 2,400 2,900

224 2,600 2,800

General use 600 400

Totals $8,500 $10,400

Foster applies manufacturing overhead to jobs at an overhead rate of 70% of direct labor cost. Job No. 221 is completed during the month.

Instructions

(a) Prepare summary journal entries to record the raw materials requisitioned, factory labor used, the assignment of manufacturing overhead to jobs, and the completion of Job No. 221.

(b) Calculate the balance of the Work in Process Inventory account at April 30.

Ex. 168

Manufacturing cost data for Dolan Company, which uses a job order cost system, are presented below:

Case A Case B

Direct Materials Used (a) $103,000

Direct Labor $ 70,000 150,000

Manufacturing Overhead Applied 63,000 (d)

Total Manufacturing Costs 240,000 (e)

Work in Process Inventory, 1/1/22 (b) 45,000

Total Cost of Work in Process 300,000 (f)

Work in Process Inventory, 12/31/22 (c) 40,000

Cost of Goods Manufactured 205,000 (g)

Instructions

Indicate the missing amount for each letter. Assume that overhead is applied on the basis of direct labor cost and that the rate is the same for both cases.

Ex. 169

Fort Corporation had the following transactions during its first month of operations:

1. Purchased raw materials on account, $85,000.

2. Raw materials of $30,000 were requisitioned to the factory. An analysis of the materials requisition slips indicated that $6,000 was classified as indirect materials.

3. Factory labor costs incurred were $175,000 of which $145,000 pertained to factory wages payable and $30,000 pertained to employer payroll taxes payable.

4. Time tickets indicated that $145,000 was direct labor and $30,000 was indirect labor.

5. Overhead costs incurred on account were $198,000.

6. Manufacturing overhead was applied at the rate of 150% of direct labor cost.

7. Goods costing $115,000 are still incomplete at the end of the month; the other goods were completed and transferred to Finished Goods Inventory.

8. Finished Goods Inventory with a cost of $100,000 was sold on account for $130,000.

Ex. 169 (Cont.)

Instructions

Journalize the above transactions for Fort Corporation.

Ex. 170

Lando Company reported the following amounts for 2022:

Raw materials purchased $85,000

Beginning raw materials inventory 5,200

Ending raw materials inventory 4,500

Beginning finished goods inventory 7,600

Ending finished goods inventory 8,000

Direct labor used 20,000

Manufacturing overhead costs applied 30,000

Beginning work in process inventory 6,100

Ending work in process inventory 6,300

Ex. 170 (Cont.)

Instructions

Calculate (a) the cost of materials used in production and (b) total manufacturing costs.

Ex. 171

A job cost sheet of Fugate Company is given below.

Instructions

(1) What is the predetermined manufacturing overhead rate?

(2) What are the total cost and the unit cost of the completed job?

(b) Prepare the entry to record the completion of the job.

Ex. 172

At May 31, 2022, the accounts of Kuhlmann Manufacturing Company show the following.

1. May 1 inventories—finished goods $12,600, work in process $14,700, and raw materials $8,200.

2. May 31 inventories—finished goods $8,500, work in process $22,900, and raw materials $7,100.

3. Debit postings to Work in Process Inventory were: direct materials $77,400, direct labor $50,000, and manufacturing overhead applied $45,000.

4. Sales totaled $225,000.

Instructions

(a) Prepare a condensed cost of goods manufactured schedule.

(b) Prepare an income statement for May through gross profit.

Ex. 173

Watson Manufacturing Company employs a job order cost system and keeps perpetual inventory records. The following transactions occurred in the first month of operations:

1. Direct materials requisitioned during the month:

Job 101 $20,000

Job 102 16,000

Job 103 24,000

$60,000

2. Direct labor incurred and charged to jobs during the month was:

Job 101 $32,000

Job 102 28,000

Job 103 20,000

$80,000

3. Manufacturing overhead was applied to jobs using a predetermined overhead rate based on 75% of direct labor costs.

4. Actual manufacturing overhead costs incurred during the month amounted to $66,000.

5. Job 101 consisting of 1,000 units and Job 103 consisting of 200 units were completed during the month.

Instructions

(a) Prepare journal entries to record the above transactions.

1. How much manufacturing overhead was applied to Job 103 during the month?

2. What is the unit cost of Jobs 101 and 103?

3. What is the balance in Work in Process Inventory at the end of the month?

4. By what amount was manufacturing overhead was under- or overapplied during the month?

Ex. 174

Graham Manufacturing is a small manufacturer that uses machine hours as its activity base for assigning overhead costs to jobs. The company estimated the following amounts for 2022 for the company and for Job 62:

Company Job 62

Direct materials $60,000 $4,500

Direct labor $25,000 $2,500

Manufacturing overhead costs $72,000

Machine hours 90,000 1,350

During 2022, the actual machine hours totaled 95,000, and actual overhead costs were $71,000.

Ex. 174 (Cont.)

Instructions

(a) Compute the predetermined overhead rate.

(b) Compute the total manufacturing costs for Job 62.

(c) How much overhead is over or underapplied for the year for the company? State amount and whether it is over- or underapplied.

(d) If Graham Manufacturing sells Job 62 for $14,000, compute the gross profit.

Ex. 175

The following inventory information is available for Ricci Manufacturing Corporation for the year ended December 31, 2022:

Beginning Ending

Inventories:

Raw materials $17,000 $19,000

Work in Process 9,000 14,000

Finished goods 11,000 8,000

Total $37,000 $41,000

In addition, the following transactions occurred in 2022:

1. Raw materials purchased on account, $75,000.

2. Incurred factory labor, $80,000, all is direct labor.

3. Incurred the following overhead costs during the year: utilities $6,800, depreciation on manufacturing machinery $8,000, manufacturing machinery repairs $9,200, factory insurance $9,000 (Credit Accounts Payable and Accumulated Depreciation).

4. Assigned $80,000 of factory labor to jobs.

5. Applied $36,000 of overhead to jobs.

Instructions

(a) Journalize the above transactions.

(b) From an analysis of the accounts, compute the following:

1. Raw materials used.

2. Completed jobs transferred to finished goods inventory.

3. Cost of goods sold.

4. Under- or overapplied overhead.

Ex. 176

Builder Bug Company allocates manufacturing overhead at $9 per direct labor hour. Job A45 required 4 boxes of direct materials at a cost of $30 per box and took employees 14 hours to complete. Employees earn $15 per hour.

Instructions

Compute the total cost of Job A45.

Ex. 177

Job cost sheets for Howard Manufacturing are as follows:

Job No 210 Quantity 1,500

Manufacturing

Date Direct Materials Direct Labor Overhead

July 1 9,000 8,000 12,000

8 8,500

10 10,000

15 5,500

25 20,000

Job No 211 Quantity 1,200

Manufacturing

Date Direct Materials Direct Labor Overhead

July 1 5,000 6,000 9,000

10 9,000

15 8,000

20 7,000

27 12,000

Instructions

1. What was the balance in Work in Process Inventory on July 1 if these were the only unfinished jobs?

2. What was the predetermined overhead rate in June if overhead was applied on the basis of direct labor cost?

3. If July is the start of a new fiscal year and the overhead rate is 20% higher than in the preceding year, how much overhead should be applied to Job 210 in July?

4. Assuming Job 210 is complete, what is the total and unit cost of the job?

5. Assuming Job 211 is the only unfinished job at July 31, what is the balance in Work in Process Inventory on this date?

(b) Journalize the summary entries to record the assignment of costs to the jobs in July. (Note: Make one entry in total for each manufacturing cost element.)

Ex. 178

Garner Company begins operations on July 1, 2022. Information from job cost sheets shows the following:

Manufacturing Costs Assigned

Job No. July August September

100 $12,000 $8,800

101 10,800 9,700 $12,000

102 5,000

103 11,800 6,000

104 5,800 7,000

Job 102 was completed in July. Job 100 was completed in August, and Jobs 101 and 103 were completed in September. Each job was sold for 60% above its cost in the month following completion.

Ex. 178 (Cont.)

Instructions

(a) Compute the balance in Work in Process Inventory at the end of July.

(b) Compute the balance in Finished Goods Inventory at the end of September.

(c) Compute the gross profit for August.

Ex. 179

The accounting records of Roland Manufacturing Company include the following information:

Dec. 31 Jan. 1

Work in Process Inventory $ 20,000 $ 50,000

Finished Goods Inventory 120,000 150,000

Direct materials used 350,000

Direct labor 160,000

Selling expenses 125,000

Manufacturing overhead is applied at a rate of 150% of direct labor cost.

Instructions

1. What is the total of the debits to Work in Process Inventory during the year?

2. What is the amount transferred to Finished Goods Inventory during the year?

3. What is Cost of Goods Sold?

Ex. 180

Grant Marwick and Associates, a CPA firm, uses job order costing to capture the costs of its audit jobs. There were no audit jobs in process at the beginning of November. Listed below are data concerning the three audit jobs conducted during November.

Rondelli Preston Lopez

Direct materials $900 $600 $300

Auditor labor costs $5,900 $6,600 $3,700

Auditor hours 66 88 45

Overhead costs are applied to jobs on the basis of auditor hours and the predetermined overhead rate is $50 per auditor hour. The Rondelli job is the only incomplete job at the end of November. Actual overhead for the month was $10,500.

Instructions

(a) Determine the cost of each job.

(b) Indicate the balance of the Work in Process Inventory account at the end of November.

(c) Calculate the ending balance of the Operating Overhead account for November.

Ex. 181

Gallagher Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $425,000 for the year, and machine usage is estimated at 125,000 hours.

For the year, $450,000 of overhead costs are incurred and 130,000 hours are used.

Instructions

(a) Compute the manufacturing overhead rate for the year.

(b) What is the amount of under - or overapplied overhead at December 31?

(c) Assuming the under - or overapplied overhead for the year is not allocated to inventory accounts, prepare the adjusting entry to assign the amount to cost of goods sold

Ex. 182

Fancy Decorating uses a job order costing system to collect the costs of its interior decorating business. Each client's consultation is treated as a separate job. Overhead is applied to each job based on the number of decorator hours incurred. Listed below are data for the current year.

Estimated overhead $880,000

Actual overhead $910,000

Estimated decorator hours 40,000

Actual decorator hours 41,000

The company uses Operating Overhead in place of Manufacturing Overhead.

Instructions

(a) Compute the predetermined overhead rate.

(b) Prepare the entry to apply the overhead for the year.

(c) Determine whether the overhead was under - or overapplied and by what amount.

Ex. 183

Martin Company applies manufacturing overhead based on direct labor hours. Information concerning manufacturing overhead and labor for the year follows:

Actual manufacturing overhead $80,000

Estimated manufacturing overhead $75,000

Direct labor hours incurred 4,800

Direct labor hours estimated 5,000

Instructions

Compute (a) the predetermined overhead rate and (b) the amount of applied manufacturing overhead.

Ex. 184

Landis Company uses a job order cost system in each of its two manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department A and machine hours in Department B. In establishing the predetermined overhead rates for 2022, the following estimates were made for the year:

Department

A B

Manufacturing overhead $2,100,000 $1,400,000

Direct labor cost 1,500,000 1,200,000

Direct labor hours 100,000 100,000

Machine hours 200,000 400,000

Ex. 184 (Cont.)

During January, the job cost sheet showed the following costs and production data:

Department

A B

Direct materials used $195,000 $128,000

Direct labor cost 100,000 110,000

Manufacturing overhead incurred 130,000 135,000

Direct labor hours 8,000 8,400

Machine hours 16,000 34,000

Instructions

(a) Compute the predetermined overhead rate for each department.

(b) Compute the total manufacturing cost assigned to jobs in January in each department.

(c) Compute the balance in the Manufacturing Overhead account at the end of January and indicate whether overhead is over- or underapplied.

Ex. 185

Edwards Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $1,800,000 for the year, and machine usage is estimated at 200,000 hours.

In January, $186,000 of overhead costs are incurred and 22,000 machine hours are used. For the remainder of the year, $1,940,000 of additional overhead costs are incurred and 214,000 additional machine hours are worked.

Instructions

(a) Compute the predetermined manufacturing overhead rate for the year.

(b) What is the amount of over- or underapplied overhead at January 31?

(c) What is the amount of over- or underapplied overhead at December 31?

Ex. 186

Klinger Company estimates that annual manufacturing overhead costs will be $4,800,000 for 2022. The actual overhead costs at the end of 2022 are $4,980,000. Activity base information for 2022 follows:

Activity Base Estimated Actual

Direct Labor Cost $3,000,000 $3,150,000

Direct Labor Hours 200,000 212,000

Machine Hours 150,000 152,000

Instructions

(a) Compute the predetermined overhead rate for each activity base.

(b) Compute the amount of overhead applied in 2022 for each activity base.

(c) Compute the amount of under- or overapplied overhead for 2022 for each activity base.

Ex. 187

Jensen Manufacturing Company makes specialty tools. In January, Jensen incurs manufacturing costs of $13,000,000 for direct material, direct labor, and overhead. 20% of the total costs represents overhead applied. The overhead rate is $1 for every $2 of direct labor costs incurred. Inventory balances were:

January 1 January 31

Raw Materials $300,000 $500,000

Work in Process 600,000 400,000

Finished Goods 400,000 200,000

At the end of January, there was $1,000 of overapplied overhead.

Instructions

(a) Determine the cost of raw materials purchased in January.

(b) Prepare a Cost of Goods Manufactured Schedule for January 2022.

(c) Compute Cost of Goods Sold for January.

Ex. 188

The following information is available for Marks Company at December 31, 2022:

1. Inventory balance Beginning of Year End of Year

Finished Goods $14,000 $10,000

Work in Process 6,000 12,000

Raw Materials 10,300 6,500

2. Debit postings to Work in Process Inventory during the year were:

Direct materials $90,000

Direct labor 60,000

Manufacturing overhead applied 75,000

3. Sales totaled $310,000 for the year.

Instructions

(a) Prepare a condensed cost of goods manufactured schedule.

(b) Prepare an income statement for the year through gross profit.