Exam 4: Job Costing

Manufacturers of large equipment such as aircraft and ships and companies involved in road construction have jobs that may require two or more years for completion.For example, Boeing Corporation might have an order for 50 aircraft for a particular airline, and the order will extend over a three-to five-year period.Aircraft are delivered as completed, but not in a batch of 50 at one time.In the typical fashion, the overhead application rate must be calculated and applied in such a way that each aircraft that is delivered has the proper amount of overhead for that aircraft. Required: What unique difficulties do you see in the calculation and application of overhead in industries such as aircraft manufacturing or shipbuilding? How do you think these firms should respond to these difficulties in determining overhead rates and applying overhead costs?

Chen Textile Company's Job A had normal spoilage with the estimated disposal selling price of $500 in March attributable to this particular job; its job B had normal spoilage with the estimated cost of $300 from the general production process failure and abnormal spoilage of $100. The company also incurred scrap due to a specific job and sold it for $60 cash. It also sold the scrap common to all jobs for $110 cash in March. Required: (1) Prepare the necessary journal entries to record normal and abnormal spoilage costs. (2) Prepare the necessary journal entries to record both types of scrap sold.

Horton Company uses a job costing system, and factory overhead is applied on the basis of machine hours. At the beginning of the year, management estimated that the company would incur $1,050,000 of factory overhead costs and use 70,000 machine hours. Horton Company recorded the following events during the month of March. (a) Purchased 200,000 pounds of materials on account. The cost was $4.00 per pound. (b) Issued 150,000 pounds of materials to production, of which 20,000 pounds were used as indirect materials. Assume all materials are at $4 per pound. (c) Incurred $250,000 of direct labor costs and $50,000 of indirect labor costs. (d) Recorded depreciation on equipment for the month, $18,000. (e) Recorded $4,000 of insurance costs for the manufacturing property. (f) Paid $8,000 cash for utilities and other miscellaneous items for the manufacturing plant. (g) Completed job M11 costing $17,000 and job M12 costing $80,000 during the month and transferred them to Finished Goods inventory account. (h) Shipped job M12 to the customer during the month. The job was invoiced at 40 percent above cost. (i) Used 10,000 machine hours during March. Required: (1) Compute Horton Company's predetermined overhead rate for the year. (2) Prepare journal entries to record the events that occurred during March. (3) Compute the amount of overapplied or underapplied overhead and prepare a journal entry to close overapplied or underapplied overhead into cost of goods sold on March 31.

L & L, CPAs, employs two full-time professional CPAs and five support employees.Budgeted direct salary costs include $160,000 for each CPA.The support employees are considered as indirect costs, and this cost was budgeted for $200,000 though the actual cost was $225,000.Actual salaries were $155,000 for each CPA.Direct and indirect costs are applied on a CPA-labor-hour basis.Total budgeted CPA-labor-hours were 5,000.If a client used 500 labor-hours, what are the budgeted direct-cost rate and the budgeted indirect-cost rate, respectively?

Badour Inc. is a job-order manufacturer. The company uses a predetermined overhead rate based on direct labor hours to apply overhead to individual jobs. For the current year, estimated direct labor hours were 114,000 and estimated factory overhead was $695,400. The following information was for September. Job X was completed during September, while Job Y was started but not finished. September 1, inventories: Materials \9 ,000 Work-in-process (All Job X) 37,400 Finished goods 80,400 Materials purchases \1 25,000 Direct materials requisitioned: Job X \5 4,500 Job Y 40,000 Direct labor hours: Job X 5,000 Job Y 4,500 Labor costs incurred: Direct labor ( \ 6.00 per hour) \5 7,000 Indirect labor 16,200 Factory supervisory salaries 7,200 Rental costs: Factory \8 ,400 Administrative offices 2,200 Total equipment depreciation costs: Factory \ 9,000 Administrative offices 1,900 Indirect materials used \ 14,400 The underapplied or overapplied overhead for September is:

Sutherland Company listed the following data for 2019: Budgeted factory overhead \ 2,100,000 Budgeted direct labor hours 89,000 Budgeted machine hours 51,000 Actual factory overhead 2,201,000 Actual direct labor hours 83,700 Actual machine hours 48,900 Assuming Sutherland applied overhead based on machine hours, the company's predetermined overhead rate for 2019 is (round to two significant digits):

ABC Company listed the following data for the current year: Budgeted factory overhead \ 1,044,000 Budgeted direct labor hours 69,600 Budgeted machine hours 24,000 Actual factory overhead 1,037,400 Actual labor hours 72,600 Actual machine hours 23,600 Assuming ABC applied overhead based on machine hours, the company's predetermined overhead rate for the year is:

Normal spoilage is defined as:

Jackson Inc. listed the following data for 2019: Budgeted factory overhead \ 1,271,000 Budgeted direct labor hours 82,000 Budgeted machine hours 41,000 Actual factory overhead 1,201,000 Actual direct labor hours 86,300 Actual machine hours 39,400 Assuming Jackson Inc.applied overhead based on machine hours, the firm's predetermined overhead rate for 2019 is:

Sutherland Company listed the following data for 2019: Budgeted factory overhead \ 2,100,000 Budgeted direct labor hours 89,000 Budgeted machine hours 51,000 Actual factory overhead 2,201,000 Actual direct labor hours 83,700 Actual machine hours 48,900 If overhead is applied based on direct labor hours, the overapplied/underapplied overhead is:

Jones and Jones CPA firm has the following budget for the year: Direct labor (for professional hours charged to clients) \2 00,000 Overhead Indirect materials 10,000 Indirect labor 250,000 Depreciation - Building 50,000 Depreciation - Furniture 5,000 Utilities 12,000 Insurance 4,800 Property taxes 5,200 Other expenses 3,000 Total \ 340,000 The firm uses direct labor as the cost driver to apply overhead to clients.During January, the firm worked for many clients; data for two of them follow: Henderson account Direct materials \ 800 Direct labor \ 3,000 Fisher account Direct materials \ 2,380 Direct labor \ 12,600 Required: (1) Compute the Jones and Jones budgeted overhead rate.Explain how this is used. (2) Compute the amount of overhead to be charged to the Henderson and Fisher accounts using the predetermined overhead rate calculated in requirement (1). (3) Compute the separate job cost for the Henderson and Fisher accounts.

Which one of the following documents records and summarizes the costs of direct materials, direct labor, and factory overhead for a particular job?

Maple Mount Fishery is a canning company in Astoria. The company uses a normal costing system in which factory overhead is applied on the basis of direct labor costs. Budgeted factory overhead for the year was $680,400, and management budgeted $324,000 of direct labor costs. During the year, the company incurred the following actual costs. Direct materials used \ 384,000 Direct labor 306,000 Factory overhead 658,000 $\text { The January } 1 \text { balances of inventory accounts are shown below. }$ Materials-all direct \ 70,000 Work-in-process 41,000 Finished goods 26,000 The December 31 balances of these inventory accounts were ten percent lower than the balances at the beginning of the year. The normal cost of goods sold, before under or overapplied overhead is:(Round your intermediate calculations to 1 decimal place.)

ABC Company uses a Materials Inventory account to record both direct and indirect materials. ABC charges direct materials to WIP, while indirect materials are charged to the Factory Overhead account. During the month of April, the company has the following cost information: Total materials (direct and indirect) purchased \ 90,000 Indirect materials issued to production 30,000 Total materials issued to production 110,000 Beginning materials inventory 50,000 The debit to Work-in-Process Inventory account for materials is:

Beckner Inc. is a job-order manufacturer. The company uses a predetermined overhead rate based on direct labor hours to apply overhead to individual jobs. For the current year, estimated direct labor hours are 133,000 and estimated factory overhead is $784,700. The following information is for September. Job X was completed during September, while Job Y was started but not finished. September 1, inventories: Materials \2 4,000 Work-in-process (All Job X) 53,400 Finished goods 105,600 Materials purchases \1 57,000 Direct materials requisitioned: Job X \5 74,000 Job Y 68,000 Direct labor hours: Job X 7,000 Job Y 5,500 Labor costs incurred: Direct labor ( \ 6.00 per hour) \7 5,000 Indirect labor 24,200 Factory supervisory salaries 11,100 Rental costs: Factory \9 ,300 Administrative offices 3,200 Total equipment depreciation costs: Factory \ 10,400 Administrative offices 2,800 Indirect materials used \ 17,800 The underapplied or overapplied overhead for September is:

Maple Mount Fishery is a canning company in Astoria. The company uses a normal costing system in which factory overhead is applied on the basis of direct labor costs. Budgeted factory overhead for the year was $680,400, and management budgeted $324,000 of direct labor costs. During the year, the company incurred the following actual costs. Direct materials used \ 384,000 Direct labor 306,000 Factory overhead 658,000 $\text { The January } 1 \text { balances of inventory accounts are shown below. }$ Materials-all direct \ 70,000 Work-in-process 41,000 Finished goods 26,000 The December 31 balances of these inventory accounts were ten percent lower than the balances at the beginning of the year. The total manufacturing costs for the year are:(Round your intermediate calculations to 1 decimal place.)

Which one of the following is the amount that actual factory overhead exceeds the factory overhead applied?

Which type of firm is most likely to require a very accurate costing system?

Which of the following companies uses process costing systems?

Product costing system design or selection: