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Exam 7: Job Costing

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Question 71

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The following cost data relate to the manufacturing activities of Falco Industries during the just completed year: $\begin{array}{lrr}\text { Total actual manufacturing overhead costs incurred (including } \$ 15,000\\ \text {of indirect materials) } &\$353,000\\ \text { Purchases of raw materials (both direct and indirect)} &\$250,000\\ \text { Direct labor cost} &\$135,000\\ \text {Inventories: } &\\ \text { Raw materials, beginning } &\$10,000\\ \text { Raw materials, ending} &\$15,000\\ \text { Work-in-Process, beginning} &\$20,000\\ \text { Work-in-Process, ending } &\$35,000\\\end{array}$ The company uses a predetermined overhead rate to apply manufacturing overhead cost to production. The predetermined overhead rate for the year was $15 per machine-hour. A total of 23,000 machine-hours was recorded for the year. Required: a. Compute the amount of underapplied or overapplied overhead cost for the year. b. Prepare a Schedule of Cost of Goods Manufactured for the year.

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Question 72

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The journal entry to record the issuance of direct materials represented by the following materials requisitions for the month includes: $\begin{array}{ccc}\text { Requisition No. }& \text { Description }&& \text { Amount }\\372 & \text { Job No. } 179 & \$ & 5,250 \\373 & \text { Job No. } 184 & \$ & 3,700 \\374 & \text { Job No. } 180 & \$ & 4,525 \\375 & \text { General factory use } & \$ & 725 \\376 & \text { Job No. } 182 & \$ & 2,470\end{array}$

A) a debit to Materials Inventory, $15,945.
B) a debit to Materials Inventory, $16,670.
C) a debit to Work-in-Process Inventory, $15,945.
D) a credit to Work-in-Process Inventory, $15,945.

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Question 73

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The Work-in-Process Inventory account of a manufacturing firm shows a balance of $3,000 at the end of an accounting period. The job cost sheets of two uncompleted jobs show charges of $500 and $300 for materials, and charges of $400 and $600 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of:

Midwest Corporation has provided the following data concerning manufacturing overhead for 2020: $\begin{array}{lrr} \text {Estimated manufacturing overhead for the year } &\$30,000\\ \text { Estimated direct labor hours for the year } &2,000\\\end{array}$ Two jobs were worked on during the year: Job A-101 and Job A-102. The number of direct labor-hours spent on Job A-101 and Job A-102 were 1,200 and 1,000, respectively. The actual manufacturing overhead was $37,000. - What is the amount of the under- or overapplied manufacturing overhead?

The following selected data were taken from the books of the Owens O-Rings Company. The company uses job costing to account for manufacturing costs. The data relate to April operations. (1) Materials and supplies were requisitioned from the stores clerk as follows: Job 405, material X, $7,000. Job 406, material X, $3,000; material Y, $6,000. Job 407, material X, $7,000; material Y, $3,200. For general factory use: materials A, B, and C, $2,300. (2) Time tickets for the month were chargeable as follows: $\begin{array}{lrr}\text { Job 405 } & \$ 11,000&\text { 3,000hours } \\\text { Job 406 } & 14,000&\text { 3,600hours } \\\text { Job 407 } & 8,000&\text { 1,900hours } \\\text { Indirect labor } & 3,700\end{array}$ (3) Other information: Factory paychecks for $36,700 were issued during the month. Various factory overhead charges of $19,400 were incurred on account. Depreciation of factory equipment for the month was $5,400. Factory overhead was applied to jobs at the rate of $3.50 per direct labor hour. Job orders completed during the month: Job 405 and Job 406. Selling and administrative costs were $2,100. Factory overhead is closed out only at the end of the year. - The end of the month Work-in-Process Inventory balance would be:

The financial records for the Lazer Manufacturing Company have been destroyed in a flood. The following information has been obtained from a separate set of books maintained by the cost accountant. The cost accountant now asks for your assistance in computing the missing amounts. $\begin{array}{lrr}&\text { Beginning } \$ & \text { Ending } \$ \\\text {Direct materials}&\$ \quad 8,000 & \$ 6,400 \\\text {Work-in-process}&7,500 & ? ? ? \\\text {Finished goods}&? ? ? & 4,200\\\text {Other information:}&\\\text {Direct materials used}&\$18,000\\\text {Direct labor}&13,500\\\text {Overhead applied}&8,000\\\text {Cost of goods manufactured}&39,500\\\text {Cost of goods sold}&57,000\end{array}$ Required: Compute the following: (a) Direct materials purchased. (b) Ending Work-in-process inventory. (c) Beginning Finished goods inventory.

Normal costing uses the actual allocation base activity to apply manufacturing overhead costs to jobs during the period.

Compute the Work-in-Process transferred to the finished goods warehouse on April 30 using the following information: $\begin{array}{lrr} \text { Work-In-Process Inventory, April 30 } &\$175\\ \text {Direct material purchased during April } &150\\ \text {Work-In-Process Inventory, April 1 } &200\\ \text {Direct labor costs incurred } &300\\ \text {Manufacturing overhead costs } &250\\ \text {Direct materials used in production } &125\\\end{array}$

Service organizations generally use the same job costing procedures as manufacturers.

The following events took place at a manufacturing company for the current year: (1) Purchased $95,000 in direct materials. (2) Incurred labor costs as follows: (a) direct, $56,000 and (b) indirect, $13,600. (3) Other manufacturing overhead was $107,000, excluding indirect labor. (4) Transferred 80% of the materials to the manufacturing assembly line. (5) Completed 65% of the Work-in-Process during the year. (6) Sold 85% of the completed goods. (7) There were no beginning inventories. - What is the value of the ending Work-in-Process Inventory?

In a job costing system, the dollar amount in the journal entry that transfers the costs of jobs from Work-in-Process Inventory to Finished Goods Inventory is the sum of the costs charged to all jobs:

Yang Company applies overhead at a rate of $26 per direct labor hour. Budgeted labor hours were 25,000; actual labor hours exceeded the budget by 1,600 hours. Overhead was overapplied by $3,758. Required: (a) Compute the budgeted overhead for the year. (b) Compute actual overhead for the year.

The journal entry to record the completion of a contract in a job costing system for a service firm is: $\begin{array} { | l | l | l | l | } \hline \text { A } & \text { Cost of Services Billed } &\text { x x x }& \\\hline & \text { Wages Payable } & & \text {x x x} \\\hline\end{array}$ $\begin{array} { | l | l | c | c | } \hline \text { B. } & \text { Work-In-Process Inventory } & \text {x x x} & \\\hline & \text { Wages Payable } & &\text { x x x} \\\hline\end{array}$ $\begin{array} { | l | l | c | c | } \hline \text { C. } & \text { Cost of Services Billed } &\text { x x x }& \\\hline & \text { Work-In-Process Inventory } & & \text {x x x} \\\hline\end{array}$ $\begin{array} { | l | l | c | c | } \hline \text { D. } & \text { Finished Goods Inventory } & \mathrm { xxx } & \\\hline & \text { Wark-In-Process Inventory } & & \mathrm { xxx } \\\hline\end{array}$

Faucette Corporation has provided the following data concerning manufacturing overhead for January: $\begin{array}{lrr} \text { Actual manufacturing overhead incurred } &\$52,000\\ \text { Manufacturing overhead applied to Work-in-Process } &\$75,000\\\end{array}$ The company's Cost of Goods Sold was $369,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?

Grayson Inc. has provided the following data for the month of October. The balance in the Finished Goods Inventory account at the beginning of the month was $49,000 and at the end of the month was $45,000. The cost of goods manufactured for the month was $226,000. The actual manufacturing overhead cost incurred was $74,000 and the manufacturing overhead cost applied to Work-in-Process was $70,000. The adjusted cost of goods sold that would appear on the income statement for October is:

What are characteristics of companies that are likely to use a job costing system and what are examples of types of companies that are likely to use a job costing system?

Accounting for direct materials and direct labor is easier than accounting for manufacturing overhead costs.

Townley Inc. has provided the following data for the month of February. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month. $\begin{array}{llr}& \text {Work-in- }& \text {Finished }& \text {Cost of Goods}\\& \text {Process}& \text {Goods}& \text {Sold}& \text {Total}\\ \text { Direct materials } &\$7,570&\$19,200&\$35,280&\$62,050\\ \text {Direct labor } &8,810&24,000&44,100&76,910\\ \text { Manufacturing } &\\ \text { overhead applied } &8,320&15,600&28,080&52,000\\ \text {Total } &\$24,700&\$58,800&\$107,460&\$190,960\\ \text { } &\\\end{array}$ Manufacturing overhead for the month was overapplied by $3,000. The company allocates any underapplied or overapplied overhead among Work-in-Process, Finished Goods, and Cost of Goods Sold at the end of the month on the basis of the overhead applied during the month in those accounts. Required: Provide the journal entry that would record the allocation of underapplied or overapplied among Work-in-Process, Finished Goods, and Cost of Goods Sold.

The predetermined overhead rate for manufacturing overhead for 2020 is $4.00 per direct labor hour. Employees are expected to earn $5.00 per hour and the company is planning on paying its employees $100,000 during the year. However, only 75% of the employees are classified as "direct labor." What was the estimated manufacturing overhead for 2020?

Before prorating the manufacturing overhead costs at the end of 2020, the Cost of Goods Sold and Finished Goods Inventory accounts had applied overhead costs of $57,500 and $20,000 in them, respectively. There was no Work-in-Process at the beginning or end of 2020. During the year, manufacturing overhead costs of $74,000 were actually incurred. The balance in the Applied Manufacturing Overhead was $77,500 at the end of 2020. - If the under or overapplied overhead is prorated between Cost of Goods Sold and the inventory accounts, how much will be allocated to the Finished Goods Inventory? (rounded to the nearest whole dollar)