Exam 4: Job Costing

Rally Company manufactures garage storage systems for homeowners. It uses a normal costing system with two direct cost categories - direct materials and direct labor - an one indirect-cost pool, manufacturing overhead costs. For 2018: Budgeted manufacturing overhead costs $1,000,000 Budgeted manufacturing labor-hours 20,000 hours Actual manufacturing overhead costs $1,100,000 Actual direct manufacturing labor-hours 22,000 Actual direct material costs $10,000 Actual direct manufacturing labor hours 200 Actual direct manufacturing labor rate $20 per hour Required: Calculate the total manufacturing costs using normal costing.

James Ford an architect charges $150 per hour for his time spent drawing blueprints for clients. His budgeted annual cost to run his office is $12,000 a year (rent and utilities) and he allocates these indirect costs based on direct labor hours. Ford predicts that he will work about 1,000 billable hours per year for his clients. Recently, Ford completed a set of blueprints for a garage for one of his clients and involving 30 hours of work, How much indirect costs should ford allocate to the garage blueprints job when considering how much to charge his client and cover his costs?

Describe job-costing and process-costing systems. Explain when it would be appropriate to use each.

Payment of the factory rent would require debits and credits to which accounts?

Direct costs are allocated to the cost object using a cost-allocation method.

A job-cost record uses information from ________.

The advantage of using normal costing instead of actual costing is ________.

Fixed costs remain constant at $450,000 per month. During high-output months variable costs are $300,000, and during low-output months variable costs are $125,000. What are the respective high and low indirect-cost rates if budgeted professional labor-hours are 24,000 for high-output months and 5,000 for low-output months?

Direct costs of a cost object are costs related to a particular cost object that can be allocated to that cost object in an economically feasible (cost-effective) way.

If indirect-cost rates were based on actual short-term usage, periods of lower demand would result in lower costs per unit.

The ________ adjusts individual job-cost records to account for underallocated or overallocated overhead.

Apple Valley Corporation uses a job cost system and has two production departments, A and B. Budgeted manufacturing costs for the year are: The actual material and labor costs charged to Job #432 were as follows: Apple Valley applies manufacturing overhead costs to jobs on the basis of direct manufacturing labor cost using departmental rates determined at the beginning of the year. For Department A, the manufacturing overhead allocation rate is ________.

Moira Company has just finished its first year of operations and must decide which method to use for adjusting cost of goods sold. Because the company used a budgeted indirect-cost rate for its manufacturing operations, the amount that was allocated ($435,000) to cost of goods sold was different from the actual amount incurred ($425,000). Ending balances in the relevant accounts were: Required: a.Prepare a journal entry to write off the difference between allocated and actual overhead directly to Cost of Goods Sold. Be sure your journal entry closes the related overhead accounts. b.Prepare a journal entry that prorates the write-off of the difference between allocated and actual overhead using ending account balances. Be sure your journal entry closes the related overhead accounts.

When $10,0000 direct materials are requisitioned, which of the following would be the correct journal entry?

The cost-allocation base is a systematic way to link an indirect cost or group of indirect costs to cost objects.

Which of the following statements regarding manufacturing overhead allocation is true?

In some service organizations, a variation of normal costing is used to provide timely information during the progression of the year, using budgeted direct labor costs and allocated budgeted overhead.

Direct materials and direct manufacturing labor become a part of work-in-process inventory on the balance sheet because the direct manufacturing labor transforms the direct materials to another asset, work-in-process inventory.

It is appropriate for service organizations such as public accounting firms to use job costing.

A local accounting firm employs 28 full-time professionals. The budgeted annual compensation per employee is $41,000. The average chargeable time is 430 hours per client annually. All professional labor costs are included in a single direct-cost category and are allocated to jobs on a per-hour basis. Other costs are included in a single indirect-cost pool, allocated according to professional labor-hours. Budgeted indirect costs for the year are $787,000, and the firm expects to have 95 clients during the coming year. What is the budgeted indirect-cost rate per hour?