Exam 3: Systems Design: Job-Order Costing

Kelsh Company uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to jobs.The company has provided the following estimated costs for next year: Direct materials \ 10,000 Direct labour \ 30,000 Sales commissions \ 40,000 Salary of production supervisor \ 20,000 Indirect materials \ 4,000 Advertising expense \ 8,000 Rent on factory equipment \ 10,000 Kelsh estimates that 5,000 direct labour hours and 10,000 machine hours will be worked during the year.What will be the predetermined overhead rate per hour?

A public accounting firm would have cost elements involving direct labour and overhead but not raw materials.

(Appendix 3A) Secrease Corporation uses machine-hours as the allocation base for applying its manufacturing overhead. Estimated manufacturing overhead cost for the year \ 594,000 Capacity 110,000 machine-hours Estimated amount of the allocation base for the year 108,000 machine-hours Amount of the allocation base for the actual output of the year \ 8,000 machine-hours Actual manufacturing overhead cost for the year \ 589,000 All of the company's manufacturing overhead is fixed. -(Appendix 3A)What is the predetermined overhead rate based on capacity to the nearest whole cent?

Normally,a job cost sheet is NOT prepared for a job until after the job has been completed.

Freeman Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs.At the beginning of the year,the company estimated manufacturing overhead would be $150,000 and direct labour hours would be 10,000.The actual figures for the year were $186,000 for manufacturing overhead and 12,000 direct labour hours.The cost records for the year will show which of the following?

In a job-order costing system,costs are traced to departments and then allocated to units of product using an averaging process.

The following partially completed T-accounts summarize last year's transactions for Kelshaw Company: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Raw Materials }$ Beg Bal 4,000 20,000 (2) (1) 18,000 $\quad$$\quad$$\quad$$\quad$$\quad$$\text { Work in Process }$ Beg Bal 8,000 50,000 (7) (2) 12,000 (4) 15,000 (6) 28,000 $\quad$$\text { Manufacturing Overhead }$ (2) 8,000 28,000 (6) (3) 12,000 (4) 5,000 (5) 4,000 $\text { Cost of Goods Sold }$ At the end of the year, the company closes out the balance in the Manufacturing Overhead account to Cost of Goods Sold. -Sharp Company's records show that overhead was overapplied by $10,000 last year.This over applied overhead was closed out to the Cost of Goods Sold account at the end of the year.In trying to determine why overhead was over applied by such a large amount,the company has discovered that $6,000 of depreciation on factory equipment was charged to administrative expense in error.Given the above information,which of the following statements is true?

The labour time ticket contains a detailed summary of the direct and the indirect labour hours of an employee.

Sai Company uses a job order cost system and applies manufacturing overhead costs to jobs using a predetermined overhead rate based on direct labour-hours. The following data were extracted from the company's accounting records for Year 6 Estimated Actual Manufacturing overhead costs \ 50,000 \ 54,000 Direct labour-hours 20,000 hours 24,000 hours Job #461 was completed during the year and the following costs had been incurred on that job: Direct materials \ 50,000 Direct labour \ 1,500 (at \ 5.00 per direct labour hour) -Suppose Job #461 contained 100 units.What unit cost would appear on the job cost sheet for job #461?

At the beginning of the year,manufacturing overhead for the year was estimated to be $250,860.At the end of the year,actual direct labor-hours for the year were 20,800 hours,the actual manufacturing overhead for the year was $245,860,and manufacturing overhead for the year was underapplied by $10,820.The predetermined overhead rate is based on direct labour-hours. Required: What must have been the estimated direct labor-hours at the beginning of the year used in setting the predetermined overhead rate?

A credit balance in the Manufacturing Overhead account at the end of the year means that overhead was underapplied.

X Company reported the following actual cost data for the year: Purchase of raw materials (all direct) \ 266,000 Direct labour cost 160,000 Manufacturing overhead costs 246,000 Change in inventories: Decrease in raw materials \ 10,000 Decrease in work in process 8,000 Decrease in finished goods 16,000 Company used a 150% predetermined overhead rate based on direct labour cost. The rate was based on annual estimated overhead cost and direct labour cost of $252,000 and $168,000, respectively. Required: a. Calculate the cost of goods manufactured. b. What was the cost of goods sold before adjusting for any under or overapplied overhead? c. By how much was manufacturing overhead cost under or overapplied? d. Prepare a summary journal entry to close any under or overapplied manufacturing overhead cost to cost of goods sold. Is such an entry appropriate in this situation? Why or why not? e. Analyze the under or overapplied manufacturing overhead costs calculated in part c above into two separate components: amount due to incorrect estimate of the annual manufacturing overhead costs and an amount due to incorrect estimate of the annual direct labour cost.

When completed goods are sold,the transaction is recorded as a debit to Cost of Goods Sold and a credit to Work in Process.

Carlo Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs.The company estimated manufacturing overhead at $255,000 for the year and direct labour hours at 100,000 hours.Actual manufacturing overhead costs incurred during the year totalled $270,000; actual direct labour hours were 105,000.What was the overapplied or underapplied overhead for the year?

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 raw materials purchased during the year?

The Samuelson Company uses a job-order costing system.The following data were recorded for June: Work in Process Job Number Inventory. June 1 475 \ 1,000 476 \ 900 477 \ 800 478 \ 600 Added During June Direct Direct Materials Labour \ 400 \ 200 \ 600 \ 800 \ 900 \ 1,400 \ 1,000 \ 1,900 Overhead is charged to production at 70% of the direct materials cost.Jobs 475,477,and 478 have been delivered to the customer.What was Samuelson's Work in Process inventory balance on June 30?

Job cost sheets supporting a normal job-order costing system contain entries for actual direct material,actual direct labour,and actual manufacturing overhead cost incurred in completing a job.

The Work in Process inventory account of a manufacturing company shows 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 direct materials and charges of $300 and $500 for direct labour.From this information,what predetermined overhead rate,as a percentage of direct labour costs,does the company appear to be using?

Sweet Company applies overhead to jobs on the basis of 125% of direct labour cost.If Job 107 shows $10,000 of manufacturing overhead applied,how much was the direct labour cost on the job?

Harrell Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs.At the beginning of the year,the company estimated its total manufacturing overhead cost at $400,000 and its direct labour hours at 100,000 hours.The actual overhead cost incurred during the year was $350,000 and the actual direct labour hours incurred on jobs during the year was 90,000 hours.What would be the manufacturing overhead for the year?