Exam 7: Job Costing

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

Carlson Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $266,400 and budgeted machine-hours were 18,500. Actual factory overhead was $287,920 and actual machine-hours were 19,050. Before disposition of over- or underapplied overhead, the cost of goods sold was $560,000 and ending inventories were as follows: Direct materials \ 60,000 WIP 190,000 Finished goods Total Required: a. Compute the amount of overhead applied to production. b. Prepare the journal entry to dispose of the over/underapplied overhead using the write-off to cost of goods sold approach. c. Prepare the journal entry to dispose of the over/underapplied overhead using the proration approach.

What are the transfers from the Finished Goods Inventory called?

What document is used to determine the actual amount of direct labor to record on a job cost sheet?

Which of the following statements is(are) true regarding product costing? (A) A job is a cost object that can be easily and conveniently distinguished from other cost objects. (B) Job cost sheets are used in accounting systems as a subsidiary ledger for the Work-in-Process account.

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

The management of Satellite Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 13,000 machine-hours. In addition, capacity is 16,000 machine-hours and the actual activity for the year is 12,900 machine-hours. All of the manufacturing overhead is fixed and is $29,120 per year. For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year. Required: a. Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity. b. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

The following events took place at a manufacturing company for the current year: (1) Purchased $95,000 in direct materials. (2) Incurred labor costs as follows: (a) direct, $56,000 and (b) indirect, $13,600. (3) Other manufacturing overhead was $107,000, excluding indirect labor. (4) Transferred 80% of the materials to the manufacturing assembly line. (5) Completed 65% of the Work-in-Process during the year. (6) Sold 85% of the completed goods. (7) There were no beginning inventories. What is the value of the ending Finished Goods Inventory?

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

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

Windham Manufacturing Company employs job costing to account for its costs. There are three production departments, and separate departmental overhead application rates are employed. All jobs generally pass through all three production departments. Data regarding the hourly direct labor rates, overhead application rates, and three jobs on which work was done during the month appear below. Job 611 and Job 613 were completed during the current month, Job 612 was still in process. (CIA Examination adapted) Direct Manufacturing overhead application Production Dept Labor Rate rate Cutting \ 14.00 40\% of direct materials Machining \ 20.00 \ 10.06 per machine hour Assembly \ 22.00 80\% of direct labor cost Job 611 Job 612 Job 613 Beginning WIP \ 52,500 \ 16,200 \- 0- Direct materials: Cutting 50,000 32,000 76,000 Machining 4,000 7,000 19,000 Assembly -0- -0- -0- Direct labor hours: Cutting 500 400 600 Machining 800 750 850 Assembly 1,100 1,200 3,500 Machine hours: Cutting -0- -0- -0- Machining 2,200 1,800 3,400 Assembly 500 800 750 Required: (a) Compute the completed costs of Job 611 and Job 613. (b) Compute the value of the Work-in-Process Inventory at the end of the month.

The cost in the ending Finished Goods inventory account consists of the direct materials, direct labor, and manufacturing overhead of all jobs still in process at the end of the period.

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

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

Dickerson Corporation has provided the following data for the month of April: Inventories: Beginning Ending Raw materials \ 21,000 \ 35,000 Work-in-Process \ 17,000 \ 19,000 Finished goods \ 46,000 \ 38,000 Additional information: Raw materials purchases \ 76,000 Direct labor cost \ 81,000 Manufacturing overhead cost incurred \ 42,000 Indirect materials included in manufacturing overhead cost incurred \ 6,000 Manufacturing overhead cost applied to Work-in-Process \ 44,000 Required: Prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold in good form.

The journal entry to record the completion of a job in a job costing system is: A Work-In-Process Inventory xxx Materials Inventory xxx B. Materials Inventory Purchases xxx C. Cost of Goods Sold xxx Finished Goods Inventory xxx D. Finished Goods Inventory xxx Work-In-Process Inventory xxx

Underapplied overhead occurs when the balance in the Manufacturing Overhead Control account is:

Service organizations, by their nature, cannot have a balance in Work-in-Process Inventory.

Augusta Test Systems manufactures automated test systems that perform quality inspections during and at the completion of the manufacturing process. As most manufacturing processes are unique, Augusta's test equipment is designed to customer specifications, and each system has a selling price in excess of $300,000. The company uses a job costing system based on the full absorption of actual costs and applies overhead on the basis of machine hours using a predetermined overhead rate. For the fiscal year ended November 30, budgeted manufacturing overhead was $1,960,000, and the expected activity level was 98,000 machine hours. Data regarding several jobs at Augusta are presented below. By the end of November, all jobs but RX-115 were completed, and all completed jobs had been delivered to customers with the exception of SL-205. Machine Job No Balance 10/31 Direct Materials Direct Labor Hours XI-107 \ 118,600 \ 4,000 \ 8,400 150 ST-211 121,450 2,500 12,160 300 XD-108 21,800 86,400 36,650 3,100 SL-205 34,350 71,800 32,175 2,700 RX-115 18,990 21,845 1,400 Required: (a) Determine the balance in the Finished Goods Inventory on November 30. (b) Compute the cost of goods manufactured for November. (c) Compute the Cost of Goods Sold for November. (d) Determine the balance in Work-In-Process Inventory on November 30.

Calvin Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor-hours for the upcoming year at 13,000 labor-hours. The estimated variable manufacturing overhead was $2.35 per labor-hour and the estimated total fixed manufacturing overhead was $156,130. Required: Compute the company's predetermined overhead rate.