Exam 3: Systems Design: Job-Order Costing

Which of the following aspects of designing a costing system is a higher-level and more subjective activity?

In a normal job-order costing system,the Work in Process inventory account contains the actual costs of direct labour,direct materials,and manufacturing overhead incurred on partially completed jobs.

The Tse Manufacturing Company uses a job-order costing system and applies overhead to jobs using a predetermined overhead rate. The company closes out any balance in the Manufacturing Overhead account to Cost of Goods Sold. During the year the company's Finished Goods inventory account was debited for $125,000 and credited for $110,000. The ending balance in the Finished Goods inventory account was $28,000. At the end of the year, manufacturing overhead was overapplied by $4,500. -What was the balance in the Finished Goods inventory account at the beginning of the year?

Simplex Company has the following estimated costs for next year: Direct materials \ 15,000 Direct labour \ 55,000 Sales commissions \ 75,000 Salary of production supervisor \ 35,000 Indirect materials \ 5,000 Advertising expense \ 11,000 Rent on factory equipment \ 16,000 Simplex estimates that 10,000 direct labour and 16,000 machine hours will be worked during the year.If overhead is applied on the basis of machine hours,what will be the overhead rate per hour?

Brabec Corporation uses direct labor-hours in its predetermined overhead rate.At the beginning of the year,the estimated direct labor-hours were 19,700 hours.At the end of the year,actual direct labor-hours for the year were 17,700 hours,the actual manufacturing overhead for the year was $392,940,and manufacturing overhead for the year was underapplied by $35,400. Required: What must have been the estimated manufacturing overhead cost at the beginning of the year used setting the predetermined overhead rate?

For the current year,Paxman Company incurred $150,000 in actual manufacturing overhead cost.The Manufacturing Overhead account showed that overhead was overapplied in the amount of $6,000 for the year.If the predetermined overhead rate was $8.00 per direct labour hour,how many hours were worked during the year?

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) -How much of any underapplied or overapplied overhead would have been due to the fact that the estimated overhead costs were different from the actual?

Knowlton Company applies overhead to completed jobs on the basis of 70% of direct labour cost.If Job 501 shows $21,000 of manufacturing overhead applied,what was the direct labour cost on the job?

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. -What are the total manufacturing costs for the year?

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. -What would be the ending Work in Process account balance?

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 transfers the cost of goods manufactured for the period?

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. -What is the manufacturing overhead applied?

The Collins Company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of materials used in production.At the beginning of the most recent year,the following estimates were made as a basis for computing the predetermined overhead rate for the year: Manufacturing overhead cost: $\quad$ $\quad$$\$ 200,000$ Direct materials cost: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\$ 160,000$ The following transactions took place during the year (all purchases and services were acquired on account): a.) Raw materials purchased: $86,000. b.) Raw materials requisitioned for use in production (all direct materials): $98,000. c.) Utility costs incurred in the factory: $15,000. d.) Salaries and wages incurred as follows: Direct materials Indirect labour: Selling and administrative salaries: \ 175,000 \ 70,000 \ 125,000 e.) Maintenance costs incurred in the factory: $15,000. f.) Advertising costs incurred: $89,000. g.) Depreciation recorded for the year: $80,000, of which 80% relates to factory assets and the remainder relates to selling and administrative assets. h.) Rental cost incurred on buildings: $70,000 (75% of the space is occupied by the factory, and 25% is occupied by sales and administration). i.) Miscellaneous selling and administrative costs incurred: $11,000. j.) Manufacturing overhead cost was applied to jobs as per company policy. k.) Cost of goods manufactured for the year: $500,000. l.) Sales for the year (all on account): $1,000,000. These goods cost $600,000 to manufacture. Required: Prepare journal entries to record the information above. Key your entries by the letters a through l.

Carver Test Systems manufactures automated testing equipment.The company uses a job-order costing system and applies overhead on the basis of machine hours (MH).At the beginning of the year,estimated manufacturing overhead was $1,960,000,and the estimated machine hours was 98,000.Data regarding several jobs at Carver are presented below. Job Number XJ-107 ST-211 XI-108 SL-205 RX-115 Beginning Direct Balance Materials \ 118,600 \ 4,000 121,450 2,500 21,800 86,400 34,350 71,800 18,990 Direct Machine Labour Hours \ 8,400 150 12,160 300 36,650 3,100 32,175 2,700 21,845 1,400 By the end of the first month (January), all jobs but RX-115 were completed, and all completed jobs had been delivered to customers except for SL-205. Required: What was the balance in Finished Goods inventory at the end of January?

(Appendix 3A)Which level of activity,if used to set a predetermined overhead rate,may encourage managers to increase selling prices as demand falls?

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 amount of direct labour cost was charged to production during the year?

The Bus Company uses a job-order costing system. The following information was recorded for September: Added During September Iob Number September 1 Inventory Direct Materials Direct I.abour 1 \ 1,000 \ 300 \ 200 2 \ 1,400 \ 250 \ 300 3 \ 500 \ 1,500 \ 150 4 \ 750 \ 4,000 \ 400 The direct labour wage rate is $10 per hour. Overhead is applied at the rate of $5 per direct labour hour. Jobs 1, 2, and 3 have been completed and transferred to finished goods. Job 2 has been delivered to the customer. -What is the cost of goods manufactured for September?

Gilford, Inc., uses a job-order costing system. Costs going through the company's work-in-process account during June are listed below. Manufacturing overhead is applied to production using a predetermined overhead rate based on direct labour cost. Work in Process Balance -0- \ 95,000 Transferred out Direct materials \ 20,000 Direct labour \ 30,000 Manufacturing Overhead \ 60,000 Balance \ 15,000\ Only Job 105 was still in process at the end of the month. This job had been charged with $3,000 in direct materials cost. Required: a.) Complete the following for Job 105: Direct materials \ 3,000 Direct labour ---- Manufacturing overhead ---- Total cost at June 30 ---- b.) Determine the total amount of materials cost charged to completed jobs during the month.

The Tse Manufacturing Company uses a job-order costing system and applies overhead to jobs using a predetermined overhead rate. The company closes out any balance in the Manufacturing Overhead account to Cost of Goods Sold. During the year the company's Finished Goods inventory account was debited for $125,000 and credited for $110,000. The ending balance in the Finished Goods inventory account was $28,000. At the end of the year, manufacturing overhead was overapplied by $4,500. -If the estimated manufacturing overhead for the year was $24,000,and the applied overhead was $26,500,what was the actual manufacturing overhead cost for the year?

(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)If the predetermined overhead rate is based on capacity,by how much was manufacturing overhead for the year over applied or under applied?