Exam 3: Systems Design: Job-Order Costing

Bitter Company incurs a direct labour rate of $15 per hour applies overhead to jobs on the basis of $1.25 per direct labour hour.If Job 107 shows $86,000 of direct material and $10,000 of manufacturing overhead applied,what is the total cost of job 107?

In a job-order costing system,when a job remains incomplete at the end of a period,how is the amount of overhead cost that has been applied to that job treated?

The information below has been taken from the cost records of Tercel Company for the past year: Raw materials used in production (all direct) \ 326,000 Total manufacturing costs charged to jobs during the year (includes raw materials, direct labour, and manufacturing overhead applied at the rate of 60 \% of direct labour cost) \ 686,000 Cost of goods available for sale \ 826,000 Selling and administrative expenses \ 25,000 Raw Materials(all direct) Work in Process Finished Goods Inventories Beginning Ending \ 75,000 \ 85,000 \ 80,000 \ 30,000 \ 90,000 \ 110,000 -What was the cost of goods manufactured during the year?

When the predetermined overhead rate is based on direct labour-hours,the amount of overhead applied to a job is proportional to the amount of actual direct labour-hours incurred on the job.

Mallet Company has only Job 844 in process on March 1 of the current year. The job has been charged with $2,000 of direct material cost, $2,500 of direct labour cost, and $1,750 of manufacturing overhead cost. The company assigns overhead cost to jobs at a predetermined rate of 70% of direct labour cost. Any under- or overapplied overhead cost is closed out to Cost of Goods Sold at the end of the month. During March, the following activity and amounts were recorded by the company: Raw materials (all direct materials): Purchased during the month $\quad$$\quad$$\quad$$\$ 29,500$ Used in production $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\$ 30,500$ Labour: Direct labour hours worked during the month 2,500 Direct labour cost incurred \ 26,500 Indirect labour costs incurred \ 5,500 Manufacturing overhead costs incurred (total) $\quad$$\quad$$\quad$$\$ 18,500$ Inventories: Raw materials (all direct) March 31 $\quad$$\quad$$\quad$$\$ 7,500$ Work in Process, March 31 $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\$ 14,500$ Work in Process inventory contains $5,500 of direct labour cost. -What is the amount of direct materials cost in the March 31 work in process inventory account?

Summit Company has provided the following inventory balances and manufacturing cost data for the month of January: Inventories: January 1 January 31 Direct materials \ 30,000 \ 40,000 Work in process \ 15,000 \ 20,000 Finished goods \ 65,000 \ 50,000 Month of January Cost of goods manufactured \ 515,000 Manufacturing overhead \ 150,000 applied Dircot materials used \ 190,000 Actual manufacturing overhead \ 144,000 Under Summit's job-order costing system, any over- or underapplied overhead is closed out to the Cost of Goods Sold account at the end of the calendar year (that is, December 31). -How much direct labour cost was incurred during January?

The following journal entries (without dollar data) were taken from the accounting records of Case Company. Case Company has a job-order costing system and applies overhead to jobs using a predetermined overhead rate. 1. Work in Process Manufacturing Overhead Wages Payable 2. Salary Expense Wages Payable 3. Manufacturing Overhead Accumulated Amortization 4. Work in Process Raw Materials 5. Work in Process Manufacturing Overhead 6. Manufacturing Overhead Raw Materials 7. Finished Goods Work in Process 8. Raw Materials Accounts Payable -Which entry records the application of overhead?

Sawyer Manufacturing Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs.Last year,the company worked 57,000 actual direct labour hours and used 40,000 machine hours.The company had estimated that it would work 55,000 direct labour hours using 44,000 machine hours during the year and incur $330,000 of manufacturing overhead cost.What was the company's manufacturing overhead applied for the year?

Indirect materials are NOT charged to a specific job but rather are included in manufacturing overhead.

The Milo Company's records for May contain the following information: Actual direct labour hours 9,000 hours Actual direct labour cost \ 47,000 Direct material purchased \ 16,000 Direct material used \ 14,000 Cost of goods sold \ 100,000 Overapplied overhead \ 5,000 Ending inventories: Raw materials Work in proeess Finished goods \ 30,000 \ 50,000 \ 70,000 The company uses a predetermined overhead rate of $5.00 per direct labour hour to apply manufacturing overhead to jobs. -What was the total cost added to Work in Process during May?

Job-order costing is used in manufacturing companies and process costing is used in service firms.

Kelly Sportswear manufactures a specialty line of T-shirts.The company uses a job-order costing system.During March,the following costs were incurred on Job 1052: Direct materials: $\quad$$\quad$$\$ 13,700$ Direct labour: $\quad$$\quad$$\quad$$\$ 4,800$ Manufacturing overhead was applied at the rate of $25 per machine hour,and Job 1052 required 800 machine hours.In addition,selling and shipping costs of $7,000 were incurred.Job 1052 consisted of 7,000 shirts and was completed on March 24.The total cost of job 1052 transferred from Work in Process to Finished Goods on March 24 is:

Worrell Corporation has a job-order costing system.The following debits (credits)appeared in the Work in Process account for the month of March: March 1, balance March 3 , direct materials March , direct labour. March 31, manufacturing overhead applied. March 31 , to finished goods. 12,000 40,000 30,000 27,000 (100,000) Worrell applies overhead at a predetermined rate of 90% of direct labour cost.Job No.232,the only job still in process at the end of March,has been charged with manufacturing overhead of $2,250.What was the amount of direct materials charged to Job No.232?

Which of the following contain(s)the detailed cost data that support the Work in Process control account?

Mallet Company has only Job 844 in process on March 1 of the current year. The job has been charged with $2,000 of direct material cost, $2,500 of direct labour cost, and $1,750 of manufacturing overhead cost. The company assigns overhead cost to jobs at a predetermined rate of 70% of direct labour cost. Any under- or overapplied overhead cost is closed out to Cost of Goods Sold at the end of the month. During March, the following activity and amounts were recorded by the company: Raw materials (all direct materials): Purchased during the month $\quad$$\quad$$\quad$$\$ 29,500$ Used in production $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\$ 30,500$ Labour: Direct labour hours worked during the month 2,500 Direct labour cost incurred \ 26,500 Indirect labour costs incurred \ 5,500 Manufacturing overhead costs incurred (total) $\quad$$\quad$$\quad$$\$ 18,500$ Inventories: Raw materials (all direct) March 31 $\quad$$\quad$$\quad$$\$ 7,500$ Work in Process, March 31 $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\$ 14,500$ Work in Process inventory contains $5,500 of direct labour cost. -Which of the following would be included in the entry to dispose of the under- or over applied overhead cost for the month?

In a normal job-order costing system,the salary of the factory supervisor would usually be recorded as a debit to which of the following accounts?

Bakerston Company is a manufacturing firm that uses job-order costing.The company's inventory balances at the beginning and end of the year were as follows: Beginning Ending Raw materials \ 14,000 \ 22,000 Work in process \ 27,000 \ 9,000 Finished goods \ 62,000 \ 77,000 The company applies overhead to jobs using a predetermined overhead rate based on machine hours. At the beginning of the year, the company estimated that it would work 33,000 machine hours and incur $231,000 in manufacturing overhead cost. The following transactions were recorded for the year: a.) Raw materials purchased: $315,000. b.) Raw materials requisitioned for use in production: $307,000 ($281,000 direct and $26,000 indirect). c.) The following employee costs were incurred: Direct materials Indireet labour: Administrative salaries: \ 377,000 \ 96,000 \ 172,000 d.) Selling costs: $147,000. e.) Factory utility costs: $10,000. f.) Depreciation for the year: $127,000, of which $120,000 is related to factory operations and $7,000 is related to selling and administrative activities. g.) Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34,000 machine hours. h.) Sales for the year: $1,253,000. Required: a. Prepare a schedule of cost of goods manufactured in good form. b. Was the manufacturing overhead under- or over applied? By how much? c. Prepare an income statement for the year in good form. The company closes out any under- or overapplied overhead to Cost of Goods Sold.

The balances in White Company's Work in Process inventory account were $15,000 on August 1 and $18,000 on August 31.The company incurred $30,000 in direct labour cost during August and requisitioned $25,000 in raw materials (all direct material).The sum of the debits to the Manufacturing Overhead account totalled $28,000 for the month while the sum of the credits totalled $30,000.Which of the following statements about finished goods inventory and manufacturing overhead is correct?

Daffe Corporation uses direct labor-hours in setting its predetermined overhead rate.At the beginning of the year,the total estimated manufacturing overhead was $165,600.At the end of the year,actual direct labor-hours for the year were 11,900 hours,manufacturing overhead for the year was overapplied by $10,760,and the actual manufacturing overhead was $160,600. Required: What must have been the predetermined overhead rate for the year?

Non-manufacturing costs are expensed as incurred,rather than going into the Work in Process account.