lOMoARcPSD|4017738

JOB Order Costing - Multiple Choices

Cost Accounting And Management, Part 2 (University of Cebu)

StuDocu is not sponsored or endorsed by any college or university

Downloaded by xxxx xxx (lesterglennlimheya@gmail.com)
 JOB ORDER

TRUE/FALSE

1. A company that produces sugar will use a job order costing system to track
production costs.

ANS: F

2. A company that produces sugar will use a process costing system to track
production costs.

ANS: T

3. A company that manufactures custom bridal gowns will use a job order costing system
to track production costs

ANS: T

4. A company that manufactures custom bridal gowns will use a process costing system
to track costs.

ANS: F

5. A company that manufactures small quantities of identifiable products will use a

job order costing system

ANS: T

6. A company that manufactures small quantities of identifiable products will use a

process costing system

ANS: F

7. A company that manufactures large quantities of homogenous goods will use a

process costing system.

ANS: T

8. In an actual job order costing system, factory overhead is assigned to a job on a periodic
basis.

ANS: T

9. A company that manufactures large quantities of homogenous goods will use a job
order costing system.

ANS: F

10. Cost flows and physical flows of units are identical.

ANS: F

Downloaded by xxxx xxx

 JOB ORDER

11. In an actual job-order costing system, factory overhead is assigned to a job continuously
during the production process.

ANS: F

12. In a normal job order costing system, actual factory overhead is applied at the end of the
period

ANS: F

13. In a normal job order costing system, factory overhead is applied using actual rates
times actual input

ANS: F

14. In a normal job order costing system, factory overhead is applied using predetermined
rates times actual input.

ANS: T

15. In a normal job order costing system, factory overhead is applied using predetermined
rates times standard input

ANS: F

16. In a standard job order costing system, factory overhead is applied using predetermined
rates times standard input.

ANS: T

17. In a standard job order costing system, factory overhead is applied using actual rates
times standard input.

ANS: F
18. In a standard job order costing system, factory overhead is applied using predetermined
rates times actual input.

ANS: F

19. In a job order costing system, costs are accumulated for each individual

job ANS: T

20. When raw materials are placed into production, the materials inventory account is
debited

ANS: F

21. When manufacturing overhead is charged to a job, the work in process account is
debited.

Downloaded by xxxx xxx

 JOB ORDER

ANS: T

22. When manufacturing overhead is charged to a job, the manufacturing overhead account
is debited.

ANS: F

23. When manufacturing overhead is charged to a job, the work in process account is
credited.

ANS: F

24. When indirect labor is applied to a job in process, the manufacturing overhead account
is debited.

ANS: F

25. When indirect labor is recorded for a job in process, the work in process account is
debited.

ANS: F

26. Standards can be computed for materials, labor, and overhead.

ANS: T

27. Standards can be used in a job order costing system if the products manufactured are
similar in nature.

ANS: T

28. Over applied factory overhead that is material in amount is closed to cost of goods sold
at year end.

ANS: F

29. Over applied factory overhead that is immaterial in amount is closed to cost of goods
sold at year end.

ANS: T

30. Over applied overhead that is material in amount is allocated between Finished Goods
Inventory, Work in Process, and Cost of Goods Sold at year end

ANS: T

31. Standards can be used in a job order costing system if the products manufactured are
varied in nature.

ANS: F

Downloaded by xxxx xxx

 JOB ORDER

32. If a normal loss is anticipated on a specific job, the overhead application rate should
include an amount for the cost of defective units less disposal value.

ANS: T

33. If a normal loss is anticipated on all jobs, the overhead application rate should include an
amount for the cost of defective units less disposal value.

ANS: F

34. Normal spoilage is considered a period cost

ANS: F

35. Abnormal spoilage is considered a period cost

ANS: T

36. The journal entry to record normal spoilage specifically identified with a particular
job includes a debit to Work in Process

ANS: F

37. The journal entry to record normal spoilage specifically identified with a particular
job includes a credit to Work in Process

ANS: T

38. Spoilage occurring on specific jobs should be considered in computing predetermined

factory overhead rates

ANS: F

COMPLETION

1. A company that manufactures sugar will use a costing system

to track production costs

ANS: process

2. A company that manufactures custom bridal gowns will use a costing

system to track production costs

ANS: job-order

3. A company that manufactures large quantities of homogeneous goods will normally

use a costing system.

ANS: process

Downloaded by xxxx xxx

 JOB ORDER

4. A company that manufactures small quantities of identifiable products will use a

costing system.

ANS: job order

5. Three methods of job-cost valuation are normal, standard, and .

ANS: actual

6. In a normal job order costing system, factory overhead is applied using

rates times input.

ANS: pre - determined; actual

7. In a standard job order costing system, factory overhead is applied using

rates times input.

ANS: pre - determined; standard

8. When a job is begun, the first document in the job order process is the
.

ANS: materials requisition

9. When raw materials are placed into production, the account

is debited

ANS: Work in process

10. When indirect materials are added to a job, the account

is debited.

ANS: manufacturing overhead

11. When manufacturing overhead is applied to a job in process, the

is debited

ANS: work in process

12. When manufacturing overhead is applied to a job in process, the

account is credited.

ANS: manufacturing overhead

13. The document that contains all information about the costs of a specific job is a
.

ANS: job order cost sheet

Downloaded by xxxx xxx

 JOB ORDER

14. When indirect labor is recorded for a job in process, is

debited.

ANS: manufacturing overhead

15. When production is completed on a job, finished goods are transferred to the
account.

ANS: Finished Goods Inventory

16. The difference between a standard and an actual quantity, price, or rate is
a(n) .

ANS: variance

17. If a substandard product can be reworked, it is known as a .

ANS: defect

18. If a substandard product cannot be reworked, it is known as .

ANS: spoilage

19. Under applied factory overhead that is immaterial in amount is closed to

at year end.

ANS: Cost of Goods Sold

20. Under applied factory overhead that is material in amount is closed to

, , and at year end.

ANS: Work in Process, Finished Goods Inventory, cost of Goods Sold

MULTIPLE CHOICE

1. Which of the following organizations would be most likely to use a job order costing system?
a. the loan department of a bank
b. the check clearing department of a bank
c. a manufacturer of processed cheese food
d. a manufacturer of video cassette tapes

ANS: A

2. When job order costing is used, the primary focal point of cost accumulation is the
a. department.
b. supervisor.
c. item.
d. job.

Downloaded by xxxx xxx

 JOB ORDER

ANS: D

3. In a job order costing system,

a. standards cannot be used.
b. an average cost per unit within a job cannot be computed.
c. costs are accumulated by departments and averaged among all jobs.
d. overhead is typically assigned to jobs on the basis of some cost driver.

ANS: D

4. What is the best cost accumulation procedure to use when many batches, each differing as
to product specifications, are produced?
a. job order
b. process
c. actual
d. standard

ANS: A

5. Which of the following could not be used in job order costing?

a. standards
b. an average cost per unit for all jobs
c. normal costing
d. overhead allocation based on the job's direct labor hours

ANS: B

6. Which of the following costing methods of valuation are acceptable in a job order
costing system?

Actual Standar Actua Predetermined

Materia d l Overhead
l Cost Material Labor Cost
Cost Cost

a. yes yes no yes

b. yes no yes no
c. no yes yes yes
d. yes yes yes yes

ANS: D

7. Which of the following costing systems allows management to quickly recognize materials,
labor, and overhead variances and take measures to correct them?

Actual Cost System Normal Cost System

a. yes yes
b. yes no
c. no yes
d. no no

Downloaded by xxxx xxx

 JOB ORDER

ANS: D

8. In a normal cost system, a debit to Work in Process Inventory would not be made for
a. actual overhead.
b. applied overhead.
c. actual direct material.
d. actual direct labor.

ANS: A

9. Which of the following are drawbacks to applying actual overhead to production?

a. A delay occurs in assigning costs to jobs or products.
b. Fluctuations in quantities produced during a period could cause varying per-unit
charges for fixed overhead.
c. Seasonality of overhead costs may cause distortions in job or product costs.
d. all answers are correct.

ANS: D

10. Job order costing and process costing have which of the following characteristics?

Job Order Costing Process Costing

a. homogeneous products heterogeneous products

and large quantities and small quantities
b. homogeneous products heterogeneous products
and small quantities and large quantities
c. heterogeneous products homogeneous products
and large quantities and small quantities
d. heterogeneous products homogeneous products
and small quantities and large quantities

ANS: D

11. A credit to Work in Process Inventory represents

a. work still in process.
b. raw material put into production.
c. the application of overhead to production.
d. the transfer of completed items to Finished Goods Inventory.

ANS: D

12. In a job order costing system, the dollar amount of the entry that debits Finished Goods
Inventory and credits Work in Process Inventory is the sum of the costs charged to all
jobs
a. started in process during the period.
b. in process during the period.
c. completed and sold during the period.
d. completed during the period.

ANS: D

Downloaded by xxxx xxx

 JOB ORDER

13. Total manufacturing costs for the year plus beginning Work in Process Inventory cost equals
a. cost of goods manufactured in the year.
b. ending Work in Process Inventory.
c. total manufacturing costs to account for.
d. cost of goods available for sale.

ANS: C

14. Which of the following would be least likely to be supported by subsidiary accounts or ledgers in
a company that employs a job order costing system?
a. Work in Process Inventory
b. Raw Material Inventory
c. Accounts Payable
d. Supplies Inventory

ANS: D

15. A journal entry includes a debit to Work in Process Inventory and a credit to Raw
Material Inventory. The explanation for this would be that
a. indirect material was placed into production.
b. raw material was purchased on account.
c. direct material was placed into production.
d. direct labor was used for production.

ANS: C

16. The source document that records the amount of raw material that has been requested by
production is the
a. job order cost sheet.
b. bill of lading.
c. interoffice memo.
d. material requisition.

ANS: D

17. A material requisition form should show all of the following information except
a. job number.
b. quantity required.
c. unit cost.
d. purchase order number.

ANS: D

18. Which of the following statements about job order cost sheets is true?
a. All job order cost sheets serve as the general ledger control account for Work
in Process Inventory.
b. Job order cost sheets can serve as subsidiary ledger information for both Work
in Process Inventory and Finished Goods Inventory.
c. If material requisition forms are used, job order cost sheets do not need to
be maintained.
d. Job order cost sheets show costs for direct material and direct labor, but not for

Downloaded by xxxx xxx

 JOB ORDER

manufacturing overhead since it is an applied amount.

ANS: B

19. The primary accounting document in a job order costing system is a(n)
a. bill of materials.
b. job order cost sheet.
c. employee time sheet.
d. materials requisition.

ANS: B

20. The cost sheets for incomplete jobs at the end of the period comprise the subsidiary ledger for
a. Finished Goods Inventory.
b. Raw Material Inventory.
c. Work in Process Inventory.
d. Supplies Inventory.

ANS: C

21. The provides management with a historical summation of total costs for a given
product.
a. job order cost sheet
b. employee time sheet
c. material requisition form
d. bill of lading

ANS: A

22. The source document that records the amount of time an employee worked on a job and his/her
pay rate is the
a. job order cost sheet.
b. employee time sheet.
c. interoffice memo.
d. labor requisition form.

ANS: B

23. Which of the following journal entries records the accrual of the cost of indirect labor used
in production?
a. debit Work in Process Inventory, credit Wages Payable
b. debit Work in Process Inventory, credit Manufacturing Overhead
c. debit Manufacturing Overhead, credit Work in Process Inventory
d. debit Manufacturing Overhead, credit Wages Payable

ANS: D

24. In job order costing, payroll taxes paid by the employer for factory employees are
commonly accounted for as
a. direct labor cost.
b. manufacturing overhead cost.

Downloaded by xxxx xxx

 JOB ORDER

c. indirect labor cost.

d. administrative cost.

ANS: B

25. The logical explanation for an entry that includes a debit to Manufacturing Overhead control and
a credit to Prepaid Insurance is
a. the insurance company sent the company a refund of its policy premium.
b. overhead for insurance was applied to production.
c. insurance for production equipment expired.
d. insurance was paid on production equipment.

ANS: C

26. The journal entry to apply overhead to production includes a credit to Manufacturing Overhead
control and a debit to
a. Finished Goods Inventory.
b. Work in Process Inventory.
c. Cost of Goods Sold.
d. Raw Material Inventory.

ANS: B

27. Production overhead does not include the costs of

a. factory depreciation and supplies.
b. factory employees' cafeteria departments.
c. production line labor.
d. the maintenance department for the factory.

ANS: C

28. In a job order costing system, the use of indirect material would usually be reflected in the
general ledger as an increase in
a. stores control.
b. work in process control.
c. manufacturing overhead applied.
d. manufacturing overhead control.

ANS: D

29. A credit to the Manufacturing Overhead control account represents the

a. actual cost of overhead incurred.
b. actual cost of overhead paid this period.
c. amount of overhead applied to production.
d. amount of indirect material and labor used during the period.

ANS: C

30. The journal entry to record the incurrence and payment of overhead costs for factory
insurance requires a debit to
a. Cash and a credit to Manufacturing Overhead.

Downloaded by xxxx xxx

 JOB ORDER

b. Manufacturing Overhead and a credit to Accounts Payable.

c. Manufacturing Overhead and a credit to Cash.
d. Work in Process Inventory and a credit to Cash.

ANS: C

31. Overhead is applied to jobs in a job order costing system

a. at the end of a period.
b. as jobs are completed.
c. at the end of a period or as jobs are completed, whichever is earlier.
d. at the end of a period or as jobs are completed, whichever is later.

ANS: C

32. In a job order costing system, the subsidiary ledger for Finished Goods Inventory is comprised
of
a. all job order cost sheets.
b. job order cost sheets for all uncompleted jobs.
c. job order cost sheets for all completed jobs not yet sold.
d. job order cost sheets for all ordered, uncompleted, and completed jobs.

ANS: C

33. Underapplied overhead resulting from unanticipated and immaterial price increases
for overhead items should be written off by
a. decreasing Cost of Goods Sold.
b. increasing Cost of Goods Sold.
c. decreasing Cost of Goods Sold, Work in Process Inventory, and Finished Goods
Inventory.
d. increasing Cost of Goods Sold, Work in Process Inventory, and Finished Goods
Inventory.

ANS: B

34. Overapplied overhead would result if

a. the plant were operated at less than normal capacity.
b. overhead costs incurred were less than costs charged to production.
c. overhead costs incurred were unreasonably small in relation to units produced.
d. overhead costs incurred were greater than costs charged to production.

ANS: B

35. Debits to Cost of Goods Sold typically represent the

a. transfer of completed items to Finished Goods Inventory.
b. costs of items sold.
c. selling price of items sold.
d. the cost of goods manufactured.

ANS: B

Downloaded by xxxx xxx

 JOB ORDER

36. In a perpetual inventory system, a transaction that requires two journal entries (or
one compound entry) is needed when
a. raw materials are purchased on account.
b. goods are sold for either cash or on account.
c. goods are finished and transferred out of Work in Process Inventory.
d. overhead is applied to Work in Process Inventory.

ANS: B

37. Which of the following statements is false?

a. While the use of standard costing is acceptable for job order costing systems,
actual cost records should still be maintained.
b. It is normally more time-consuming for a company to use standard costs in a job
order costing system.
c. Standards can be used in a job order costing system, if the company
usually produces items that are similar in nature.
d. Standard costs may be used for material, labor, or both material and labor in a job
order costing environment.

ANS: B

38. The trend in job order costing is to

a. eliminate the data entry function for the accounting system.
b. automate the data collection and data entry functions.
c. use accounting software to change the focal point of the job order system.
d. create an Intranet to share information between competitors.

ANS: B

39. As data input functions are automated, Intranet data becomes more
a. complicated to access.
b. manufacturing, but not accounting, oriented.
c. real-time accessible.
d. expensive to install, but easier to use.

ANS: C

40. The use of standard material or labor costs in job order costing
a. is similar to the use of predetermined overhead rates in a normal costing system.
b. will keep actual costs of jobs from fluctuating due to changes in component costs.
c. is appropriate for any company making a units to customer specification.
d. all answers are correct.

ANS: A

41. After the completion of production, standard and actual costs are compared to determine the
of the production process.
a. effectiveness
b. complexity
c. homogeneity
d. efficiency

Downloaded by xxxx xxx

 JOB ORDER

ANS: D

42. A company producing which of the following would be most likely to use a price standard
for material?
a. furniture
b. NFL-logo jackets
c. picture frames
d. none of the above

ANS: B

43. A company producing which of the following would be most likely to use a time standard
for labor?
a. mattresses
b. picture frames
c. floral arrangements
d. stained-glass windows

ANS: A

44. A service organization would be most likely to use a predetermined overhead rate based on
a. machine hours.
b. standard material cost.
c. direct labor.
d. number of complaints.

ANS: C

45.Knowing specific job costs enables managers to effectively perform which of the following tasks?
a. estimate costs of future jobs.
b. establish realistic job selling prices.
c. evaluate job performance.
d. all answers are correct.

ANS: D

46. A job order costing system is likely to provide better

(1) inventory valuations for financial statements.

(2) control over inventory.
(3) information about ability to accept additional production work.

(1) (2) (3)

a. yes no no
b. no yes yes
c. no no no
d. yes yes yes

Downloaded by xxxx xxx

 JOB ORDER

ANS: D

47. In a production environment that manufactures goods to customer specifications, a job order
costing system
a. can be used only if standard costs are used for materials and labor.
b. will provide reasonable product cost information only when all jobs utilize
approximately the same quantities of material and labor.
c. may be maintained using either actual or predetermined overhead rates.
d. emphasizes that large customers create the most costs even though they also
provide the most revenues.

ANS: C

48. A unit that is rejected at a quality control inspection point, but that can be reworked and sold,
is referred to as a
a. spoiled unit.
b. scrap unit.
c. abnormal unit.
d. defective unit.

ANS: D

49. The cost of abnormal losses (net of disposal costs) should be written off

as Product cost Period cost

a. yes no
b. yes yes
c. no yes
d. no no

ANS: C

50. In a job order costing system, the net cost of normal spoilage is equal to
a. estimated disposal value plus the cost of spoiled work.
b. the cost of spoiled work minus estimated spoilage cost.
c. the units of spoiled work times the predetermined overhead rate.
d. the cost of spoiled work minus the estimated disposal value.

ANS: D

51. If abnormal spoilage occurs in a job order costing system, has a material dollar value, and
is related to a specific job, the recovery value of the spoiled goods should be

debited to credited to

a. a scrap inventory account the specific job in process

b. the specific job in process overhead
c. a loss account the specific job in process
d. factory overhead sales

Downloaded by xxxx xxx

 JOB ORDER

ANS: A

52. In a job order costing system, the net cost of normal spoilage is equal to
a. estimated disposal value plus the cost of spoiled work.
b. the cost of spoiled work minus estimated spoilage cost.
c. the units of spoiled work times the predetermined overhead rate.
d. the cost of spoiled work minus the estimated disposal value.

ANS: D

53. Shrinkage should be treated as

a. defective units.
b. spoiled units.
c. miscellaneous expense.
d. a reduction of overhead.

ANS: B

54. Spoiled units are

a. units that cannot be economically reworked to bring them up to standard.
b. units that can be economically reworked to bring them up to standard.
c. the same as defective units.
d. considered abnormal losses.

ANS: A

55. Abnormal spoilage is

a. spoilage that is forecasted or planned.
b. spoilage that is in excess of planned.
c. accounted for as a product cost.
d. debited to Cost of Goods Sold.

ANS: B

56.Normal spoilage is defined as unacceptable production that

a. arises because of a special job or process.
b. occurs in on-going operations.
c. is caused specifically by human error.
d. is in excess of that which is expected.

ANS: B

57. Which of the following would fall within the range of tolerance for a production cycle?

Abnormal loss Normal loss

a. yes yes
b. yes no
c. no no
d. no yes

Downloaded by xxxx xxx

 JOB ORDER

ANS: D

58. The net cost of normal spoilage in a job order costing system in which spoilage is common to all
jobs should be
a. assigned directly to the jobs that caused the spoilage.
b. charged to manufacturing overhead during the period of the spoilage.
c. charged to a loss account during the period of the spoilage.
d. allocated only to jobs that are completed during the period.

ANS: B

59. Cajun Company. uses a job order costing system. During April 20X6, the following
costs appeared in the Work in Process Inventory account:

Beginning balance $ 24,000

Direct material used 70,000
Direct labor incurred 60,000
Applied overhead 48,000
Cost of goods manufactured 185,000

Cajun Company applies overhead on the basis of direct labor cost. There was only one job left
in Work in Process at the end of April which contained $5,600 of overhead. What amount of
direct material was included in this job?
a. $4,400
b. $4,480
c. $6,920
d. $8,000

ANS: A
Total Costs Incurred 202,000
Less: Cost of Goods Manufactured (185,000
)
Costs remaining in WIP 17,000
Overhead 5,600
Direct Labor (5,600/.80) 7,000 (12,600
)
Direct Materials 4,400

60. Quest Co. is a print shop that produces jobs to customer specifications. During January 20X6,
Job #3051 was worked on and the following information is available:

Direct material used $2,500

Direct labor hours worked 15
Machine time used 6
Direct labor rate per hour $7
Overhead application rate per hour of machine time $18

What was the total cost of Job #3051 for January?

a. $2,713
b. $2,770

Downloaded by xxxx xxx

 JOB ORDER

c. $2,812
d. $3,052

ANS: A
Direct Materials $ 2,500
Direct Labor (15 hours * $7/hour) 105
Factory Overhead (6 hrs machine time *
* $18/mach hr) 108
$ 2,713

Alpha Company

Alpha Co. uses a job order costing system. At the beginning of January, the company had two
jobs in process with the following costs:

Direct Material Direct Labor Overhead

Job #456 $3,400 $510 $255
Job #461 1,100 289 ?

Alpha pays its workers $8.50 per hour and applies overhead on a direct labor hour basis.

61. Refer to Alpha Company. What is the overhead application rate per direct labor
hour? a. $ 0.50
b. $ 2.00
c. $ 4.25
d. $30.00

ANS: C
Direct Labor Hours: $510/$8.50 Overhead Application Rate:
60 hrs
$255 / 60 hrs
$4.25

62. Refer to Alpha Company. How much overhead was included in the cost of Job #461 at
the beginning of January?
a. $ 144.50
b. $ 153.00
c. $2,200.00
d. $2,456.50

ANS: A
Direct Labor Hours: $289/$8.50 Overhead Application Rate:
34 hrs
$255 / 60 hrs
34 hrs * $4.25/hr $4.25
$144.50

Downloaded by xxxx xxx

 JOB ORDER

63. Refer to Alpha Company. During January, Alpha’s employees worked on Job #649. At the end
of the month, $714 of overhead had been applied to this job. Total Work in Process at the end
of the month was $6,800 and all other jobs had a total cost of $3,981. What amount of direct
material is included in Job #649?
a. $ 677.00
b. $1,391.00
c. $2,142.00
d. $4,658.00

ANS: A
Direct Materials--Job 649
Total Work in Process $ 6,800
Other Work in Process (3,981
)
Costs remaining in WIP 2,819
Overhead 714
Direct Labor (OH x 2) $714 * 2 1,428 (2,142
)
Direct Materials $ 677

64. Brown Corporation manufactures products on a job order basis. The job cost sheet for Job
#656 shows the following for March:

Direct material $5,000

Direct labor (100 hours @ $7.25) $725
Machine hours incurred 40
Predetermined overhead rate per machine hour $26

At the end of March, what total cost appears on the job cost sheet for Job #656?
a. $5,725
b. $5,765
c. $6,765
d. $8,325

ANS: C
Direct Materials $ 5,000
Direct Labor (15 hours * $7/hour) 725
Factory Overhead (26 hrs machine time *
* $40/mach hr) 1,040
$ 6,765

65. Products at Redd Manufacturing are sent through two production departments: Fabricating and
Finishing. Overhead is applied to products in the Fabricating Department based on 150 percent
of direct labor cost and $18 per machine hour in Finishing. The following information is
available about Job #297:

Fabricating Finishing
Direct material $1,590 $580
Direct labor cost ? 48
Direct labor hours 22 6

Downloaded by xxxx xxx

 JOB ORDER

Machine hours 5 15
Overhead applied 429 ?

What is the total cost of Job #297?

a. $2,647
b. $3,005
c. $3,093
d. $3,203

ANS: D
Direct Labor Fabricating $429/1.50 = $286
Applied Overhead Finishing 15 hrs * $18 =
$270
Fabricatin Finishing
g
Direct material $ 1,590 $ 580
Direct labor cost 286 48
Overhead applied 429 270
Total Costs 2,305 898 $ 3,203

66. Virginia Company applies overhead to jobs at the rate of 40 percent of direct labor cost. Direct
material of $1,250 and direct labor of $1,400 were expended on Job #145 during June. On May
31, the balance of Job #145 was $2,800. The balance on June 30 is:
a. $3,210.
b. $4,760.
c. $5,450.
d. $6,010.

ANS: D
Beginning WIP $ 2,800
Direct Materials 1,250
Direct Labor 1,400
Factory Overhead ($1400 * 40%) 560
Ending WIP $ 6,010

Jackson Company.

Jackson Company uses a job order costing system and the following information is available
from its records. The company has three jobs in process: #6, #9, and #13.

Raw material used $120,000

Direct labor per hour $8.50
Overhead applied based on direct labor cost 120%

Direct material was requisitioned as follows for each job respectively: 30 percent, 25 percent,
and 25 percent; the balance of the requisitions was considered indirect. Direct labor hours per
job are 2,500; 3,100; and 4,200; respectively. Indirect labor is $33,000. Other actual overhead
costs totaled $36,000.

Downloaded by xxxx xxx

 JOB ORDER

67. Refer to Jackson Company. What is the prime cost of Job #6?
a. $42,250
b. $57,250
c. $73,250
d. $82,750

ANS: B

Direct Materials (120,000 * 30%) $ 36,000

Direct Labor (2500 * $8.50) 21,250

Total Prime Costs $ 57,250

68. Refer to Jackson Company. What is the total amount of overhead applied to Job #9?
a. $18,250
b. $26,350
c. $30,000
d. $31,620

ANS: D
Direct Labor Hours Direct Labor Rate OH Application Total
Rate
3100 $8.50 120% $31,620

69. Refer to Jackson Company. What is the total amount of actual overhead?
a. $36,000
b. $69,000
c. $93,000
d. $99,960

ANS: C

Indirect Materials ($120,000 * 20%) $ 24,000

Indirect Labor 33,000
Other Overhead Costs 36,000
Total Prime Costs $ 93,000

70. Refer to Jackson Company. How much overhead is applied to Work in Process?
a. $ 69,000
b. $ 99,960
c. $132,960
d. $144,000

ANS: B
Direct Labor Hours 6 2500
9 3100
13 4200 9,800
Direct Labor Rate $ 8.50
Overhead Application Rate 120%

Downloaded by xxxx xxx

 JOB ORDER

Total Overhead Applied $

71. Refer to Jackson Company. If Job #13 is completed and transferred, what is the balance in
Work in Process Inventory at the end of the period if overhead is applied at the end of the
period?
a. $ 96,700
b. $ 99,020
c. $139,540
d. $170,720

ANS: D
Step 1: Determine Total Cost of Job 13
DM: $120,000 * .25 $ 30,000
DL: 4,200 * 8.50 35,700
FOH: 35,700 * 120% 42,840 108,540

Step 2: Compute Total Cost of Job 6

DM: $120,000 * .30 $ 36,000
DL: 2,500 * 8.50 21,250
FOH: 21,250 * 120% 25,500 82,750
Step 2: Compute Total Cost of Job 9 DM: $120,000 * .25
DL: 3,100 * 8.50 $ 30,000
FOH: 26,350 * 120% 26,350
31,620
87,970
Total Costs of Jobs 6 and 9170,720

72. Refer to Jackson Company. Assume the balance in Work in Process Inventory was $18,500 on
June 1 and $25,297 on June 30. The balance on June 30 represents one job that contains
direct material of $11,250. How many direct labor hours have been worked on this job (rounded
to the nearest hour)?
a. 751
b. 1,324
c. 1,653
d. 2,976

ANS: A
Step 1: Determine DL and FOH WIP at June 30:
Less DM in WIP $ 25,297
11,250 14,047

Step 2: Separate DL and FOH Let x = DL; 1.2x = FOH

x + 1.2x = 14,047 2.2x = 14,047
x = $6,385

Downloaded by xxxx xxx

 JOB ORDER

Step 3: Compute DL Hours

$6,385 ÷ 8.50 751 hours

Beta Company

The following information pertains to Beta Company for September 20X4.

Direct Material Direct Labor Overhead

Job #323 $3,200 $4,500 ?
Job #325 ? 5,000 ?
Job #401 5,670 ? $5,550

Beta Company applies overhead for Job #323 at 140 percent of direct labor cost and at 150
percent of direct labor cost for Jobs #325 and #401. The total cost of Jobs #323 and #325
is identical.

73. Refer to Beta Co. What amount of overhead is applied to Job #323?
a. $4,800
b. $5,550
c. $6,300
d. $7,500

ANS: C
Direct Labor Application Total
Rate Overhead
$4,500 140% $6,300

74. Refer to Beta Co. What amount of overhead is applied to Job #325?
a. $8,325
b. $7,500
c. $7,000
d. $5,000

ANS: B
Direct Labor Application Total
Rate Overhead
$5,000 150% $7,500

75. Refer to Beta Co. What is the amount of direct materials for Job
#325? a. $1,950
b. $1,500
c. $3,700
d. $7,500

ANS: B

Step 1: Determine OH for Jobs 323 and 325

323 $ 6,300
325 7,500

Downloaded by xxxx xxx

 JOB ORDER

Step 2: Compute Total Cost of Job 323 DM $ 3,200

DL 4,500
FOH 6,300 14,000
Step 3: Compute Direct Materials for Job 325
(14,000 - (5,000 + 7,500) $ 1,500

76. Refer to Beta Co. Assume that Jobs #323 and #401 are incomplete at the end of
September. What is the balance in Work in Process Inventory at that time?
a. $18,920
b. $22,620
c. $28,920
d. $30,120

ANS: C
Step 1: Determine DL for Job 401
$5,550 ÷ 150% 3,700

Step 2: Compute Total Cost of Job 401 DM $ 5,670

DL 3,700
FOH 5,550 14,920
Step 2: Compute Total Cost of Job 323 DM $ 3,200
DL 4,500
FOH 6,300 14,000

Total Costs of Jobs 323 and 401 28,920

Camden Company

Camden Company has two departments (Processing and Packaging) and uses a job order
costing system. Baker applies overhead in Processing based on machine hours and on direct
labor cost in Packaging. The following information is available for July:

Processing Packaging
Machine hours 2,500 1,000
Direct labor cost $44,500 $23,000
Applied overhead $55,000 $51,750

77. Refer to Camden Company. What is the overhead application rate per machine hour for
Processing?
a. $ 0.81
b. $ 1.24
c. $17.80
d. $22.00

Downloaded by xxxx xxx

 JOB ORDER

ANS: D
Total Applied Machine Hours Rate per
Overhead Hour
$55,000 2,500 $22.00
78. Refer to Camden Co. What is the overhead application rate for Packaging?
a. $ 0.44
b. $ 2.25
c. $23.00
d. $51.75

ANS: B
Total Applied Total Direct Labor Rate per
Overhead Hour
$51,750 $23,000 $2.25

Tiger Company

Tiger Company has a job order costing system and an overhead application rate of 120 percent
of direct labor cost. Job #63 is charged with direct material of $12,000 and overhead of $7,200.
Job #64 has direct material of $2,000 and direct labor of $9,000.

79. Refer to Tiger Co. What amount of direct labor cost has been charged to Job
#63? a. $ 6,000
b. $ 7,200
c. $ 8,640
d. $14,400

ANS: A
Total Applied Overhead Direct Labor
Overhead Application Charged
Rate
$7,200 120% $6,000

80. Refer to Tiger Company. What is the total cost of Job

#64? a. $10,800
b. $11,000
c. $21,800
d. $30,200

ANS: C
Direct Materials Direct Labor 2,000
Factory Overhead ($9,000 * 9,000
120%) 10,800

Bradley Company

Bradley Company uses a job order costing system. Assume that Job #504 is the only one in
process. The following information is available:

Downloaded by xxxx xxx

 JOB ORDER

Budgeted direct labor hours Budgeted machine

65,000 hours 9,000
Budgeted overhead $350,000 Direct material $110,500
Direct labor cost $70,000

81. Refer to Bradley Company. What is the overhead application rate if Bradley uses a
predetermined overhead application rate based on direct labor hours (rounded to the nearest
whole dollar)?
a. $ 0.20
b. $ 5.00
c. $ 5.38
d. $38.89

ANS: C
Budgeted Budgeted Overhead
Overhead Direct Labor Application
Hours Rate
$350,000 65,000 $5.38

82. Refer to Bradley Company. What is the total cost of Job #504 assuming that overhead is applied
at the rate of 135% of direct labor cost (rounded to the nearest whole dollar)?
a. $192,650
b. $268,250
c. $275,000
d. $329,675

ANS: C
Direct Materials 110,50
0
Direct Labor 70,00
0
Factory Overhead ($70,000 * 135%) 94,500
Total Cost of Job #504 275,00
0

83. At the end of the last fiscal year, Roberts Company had the following account balances:

Overapplied overhead $ 6,000

Cost of Goods Sold $980,000
Work in Process Inventory $ 38,000
Finished Goods Inventory $ 82,000

If the most common treatment of assigning overapplied overhead were used, the final balance
in Cost of Goods Sold is:
a. $974,000.
b. $974,660.
c. $985,340.
d. $986,000.

Downloaded by xxxx xxx

 JOB ORDER

ANS: A
Unadjusted COGS less: Overapplied Adjusted
OH COGS
$980,000 $6,000 $974,000

84. Strong Products has no Work in Process or Finished Goods inventories at the close of
business on December 31, 20X4. The balances of Strong Products’ accounts as of December
31, 20X4, are as follows:

Cost of goods sold--unadjusted $2,040,000

Selling & administrative expenses 900,000
Sales 3,600,000
Manufacturing overhead control 700,000
Manufacturing overhead applied 648,000

Pretax income for 20X4 is:

a. $608,000.
b. $660,000.
c. $712,000.
d. undeterminable from the information given.

ANS: A

Sales $
3,600,000
Cost of Goods Sold 2,040,000
Factory Overhead Underapplied (700,000-648,000) 52,000 (2,092,000
)
Selling, General and Administrative Expenses (900,000
)
Pretax Income $ 608,000

Wilson Manufacturing Company

Wilson Manufacturing Company produces beach chairs. Chair frames are all the same size, but
can be made from plastic, wood, or aluminum. Regardless of frame choice, the same sailcloth is
used for the seat on all chairs. Wilson has set a standard for sailcloth of $9.90 per square yard
and each chair requires 1 square yard of material. Wilson produced 500 plastic chairs, 100
wooden chairs, and 250 aluminum chairs during June. The total cost for 1,000 square yards of
sailcloth during the month was $10,000. At the end of the month, 50 square yards of sailcloth
remained in inventory.

85. Refer to Wilson Manufacturing Company. The unfavorable material price variance for sailcloth
purchases for the month was
a. $ 100.
b. $ 495.
c. $1,090.
d. $1,585.

Downloaded by xxxx xxx

 JOB ORDER

ANS: A

$10,000 ÷ 1,000 $10.00 per

yard

$(9.90 - 10.00) * 1,000 yards $100

86. Refer to Wilson Manufacturing Company. Assuming that there was no sailcloth in inventory
at the beginning of June, the unfavorable material quantity variance for the month was
a. $ 495.
b. $ 500.
c. $ 990.
d. $1,000.

ANS: C
850 chairs * 1 yard per chair 850 yards
Actual usage (1,000 - 50) 950 yards
Unfavorable usage variance 100
yards
9.90/yard
$ 990

87. Refer to Wilson Manufacturing Company. Wilson could set a standard cost for which of the
following?

Frame Predetermined Labor

cost OH rate rate

a. yes yes yes

b. no no no
c. yes no no
d. no yes yes

ANS: D

SHORT ANSWER

1. Compare and contrast job order and process costing systems.

ANS:
Job order costing is characterized by the production of small quantities of heterogeneous
distinct or unique items. Items are produced according to customer specifications and, at a
minimum, direct material and direct labor costs can be traced to specific jobs. Process costing
is characterized by the production of large quantities of homogeneous (alike or similar in nature)
items. Specific items cannot be identified with specific costs during the production process.

2. Discuss actual costing, normal costing, and standard costing.

ANS:

Downloaded by xxxx xxx

 JOB ORDER

Actual costing, normal costing, or standard costing may be used in either a job order costing or
process costing system. Actual costing assigns the actual cost of all direct material, direct labor,
and overhead to the units produced. Normal costing uses actual direct material and direct labor
cost and a predetermined overhead application rate to cost products. Standard costing
establishes "norms" for direct material and direct labor quantities and/or costs and uses a
predetermined (standard) overhead rate for the application of overhead to determine product
cost.

3. What is a "job" as defined in a job order costing system?

ANS:
A job is a single unit or a group of like items that is produced to customer specifications. A job is
separately identifiable from other jobs. Each job is treated as a cost object, and costs (typically
actual direct material, actual direct labor, and overhead applied using a predetermined rate) are
attached to each job as it flows through the production process.

4. What information should be contained in a subsidiary ledger for Work in Process Inventory in
a job order costing system?

ANS:
The Work in Process Inventory subsidiary ledger should contain information on all incomplete
jobs. This information will include the amount of direct material and direct labor costs in
production, as well as the amount of overhead applied to each job. The subsidiary ledger for
Work in Process Inventory is composed of all job cost sheets for uncompleted jobs and
substantiates the balance in the general ledger Work in Process Inventory control account.

5. Discuss the basic forms used in a job order costing system.

ANS:
The forms used in a job order costing system include (1) a job order cost sheet which records all
the financial and significant production data (actual or standard, and possibly budgeted) relating
to a particular job; (2) a material requisition form which records the costs and quantities of
material that has been requisitioned for a particular job; and (3) an employee time sheet which
records the jobs worked on by an employee and the amount of time spent on each job.

6. Can standard costing be used in job order costing? If so, what conditions must exist? If not,
explain why.

ANS:
Yes. Firms that use job order costing can also base their costs on standards. Each job must be
fairly similar to each other job. Standards may be used for the prices of material and labor if the
jobs use basically the same kind of material and labor. If jobs are homogeneous enough,
standards can also be used for materials and labor quantities. Some companies may choose to
only use price standards, others only quantity standards, and others may use both price and
quantity standards.

7. Discuss the accounting treatment of spoilage in a job order costing system.

ANS:

Downloaded by xxxx xxx

 JOB ORDER

If the spoilage is common to all jobs, is normal, and can be estimated, the net cost is applied to
production using a predetermined overhead rate that was set by including the spoilage estimate
in estimated overhead. If spoilage pertains to a particular job and is normal, the disposal value
of the spoiled goods should be removed from that particular job. If the spoilage is abnormal, the
net cost should be charged to a loss account and credited to the particular Work in Process job
that created the spoilage.

PROBLEM

1. Prepare the necessary journal entries from the following information for Anderson
Company, which uses a perpetual inventory system.

a. Purchased raw material on account, $56,700.

b. Requisitioned raw material for production as follows: direct material-
80 percent of purchases; indirect material-15 percent of purchases.
c. Direct labor wages of $33,100 are accrued as are indirect labor wages of
$12,500.
d. Overhead incurred and paid for is $66,900.
e. Overhead is applied to production based on 110 percent of direct labor cost.
f. Goods costing $97,600 were completed during the period.
g. Goods costing $51,320 were sold on account for $77,600.

ANS:

a. Raw Material Inventory 56,700

Accounts Payable 56,700
b. Work in Process Inventory 45,360
Manufacturing Overhead 8,505
Raw Material Inventory 53,865
c. Work in Process Inventory 33,100
Manufacturing Overhead 12,500
Wages Payable 45,600
d. Manufacturing Overhead 66,900
Cash 66,900
e. Work in Process Inventory 36,410
Manufacturing Overhead 36,410
f. Finished Goods Inventory 97,600
Work in Process 97,600
Inventory 51,320
g. Cost of Goods Sold 51,320
Finished Goods Inventory 77,600
Accounts Receivable 77,600
Sales

2. Richards Company employs a job order costing system. Only three jobs-Job #205, Job #206,
and Job #207-were worked on during January and February. Job #205 was completed February
10; the other two jobs were still in production on February 28, the end of the company's
operating year. Job cost sheets on the three jobs follow:

Job Cost Sheet

Job #205 Job #206 Job #207

Downloaded by xxxx xxx

 JOB ORDER

January costs incurred:

Direct material $16,500 $ 9,300 $ —
Direct labor 13,000 7,000 —
Manufacturing overhead 20,800 11,200 —

February costs incurred:

Direct materials — 8,200 21,300
Direct labor 4,000 6,000 10,000
Manufacturing overhead ? ? ?

The following additional information is available:

a. Manufacturing overhead is assigned to jobs on the basis of direct labor cost.

b. Balances in the inventory accounts at January 31 were as follows:

Raw Material $40,000

Work in Process ?
Finished Goods 85,000

Required:
a. Prepare T-accounts for Raw Material, Work in Process Inventory, Finished
Goods Inventory, and Manufacturing Overhead Control. Enter the January 31
inventory balances given previously; in the case of Work in Process
Inventory, compute the January 31 balance and enter it into the Work in
Process Inventory T-account.

b. Prepare journal entries for February as follows:

1. Prepare an entry to record the issue of materials into production and post the
entry to appropriate T-accounts. (In the case of direct material, it is not
necessary to make a separate entry for each job.) Indirect materials used during
February totaled $4,000.

2. Prepare an entry to record the incurrence of labor cost and post the entry to
appropriate T-accounts. (In the case of direct labor, it is not necessary to make
a separate entry for each job.) Indirect labor cost totaled $8,000 for February.

3. Prepare an entry to record the incurrence of $19,000 in various actual

manufacturing overhead costs for February (credit Accounts
Payable).

Downloaded by xxxx xxx

 JOB ORDER

c. What apparent predetermined overhead rate does the company use to

assign overhead cost to jobs? Using this rate, prepare a journal entry to
record the application of overhead cost to jobs for February (it is not
necessary to make a separate entry for each job). Post this entry to
appropriate T-accounts.

d. As stated earlier, Job #205 was completed during February. Prepare a

journal entry to show the transfer of this job off of the production line and
into the finished good warehouse. Post the entry to appropriate T-accounts.

e. Determine the balance at February 28 in the Work in Process inventory

account. How much of this balance consists of the cost of Job #206? Job
#207?

ANS:
a.

Raw Materials Work in Process

Inventory Inventory
BB 40,000 BB 77,800
29,500 60,700
31,500 20,000
32,000
98,600

Finished Goods Manufacturing

Inventory Overhead Control
BB 85,000 4,000
60,700 8,000 32,000
19,000

b. 1. Work in Process 29,500

Inventory
Manufacturing Overhead 4,000
Control
Raw Materials
Inventory 33,500

2. Work in Process 20,000

Inventory
Manufacturing Overhead
Control 8,000
Payroll 28,000

3. Manufacturing Overhead
Control 19,000

Downloaded by xxxx xxx

 JOB ORDER

Accounts Payable 19,000

c. 160%/DL COST  $20,000 = $32,000

Work in Process Inventory 32,000

Manufacturing Overhead
Control 32,000
d. Finished Goods Inventory 60,700
Work in Process Inventory 60,700

e. WIP INV 98,600

Job 206 =
Job 207 = $47,300
$51,300

JOB #205 JOB #206 JOB #207

Beg WIP $50,300 $27,500 -
Direct Mat 0 8,200 $21,300
Direct Labor 4,000 6,000 10,000
Factory Overhead 6,400 9,600 16,000
$60,700 $51,300 $47,300

3. The Pittman Company manufactures special purpose machines to order. On January 1,

there were two jobs in process, #705 and #706. The following costs were applied to these jobs
in the prior year:
Job No.
705 706
Direct material $ 5,000 $ 8,000
Direct labor 4,000 3,000
Overhead 4,400 3,300
Total $13,400 $14,300

During January, the following transactions took place:

* Raw material costing $40,000 was purchased on account.

* Jobs #707, #708, and #709 were started and the following costs were
applied to them:

JOB
707 708 709
Direct materials $3,000 $10,000 $7,000
Direct labor 5,000 6,000 4,000

* Job #705 and Job #706 were completed after incurring additional direct labor
costs of $2,000 and $4,000, respectively
* Wages paid to production employees during January totaled $25,000.
* Depreciation for the month of January totaled $10,000.
* Utilities bills in the amount of $10,000 were paid for operations during

Downloaded by xxxx xxx

 JOB ORDER

December.
* Utilities bills totaling $12,000 were received for January operations.
* Supplies costing $2,000 were used.
* Miscellaneous overhead expenses totaled $24,000 for January.

Actual overhead is applied to individual jobs at the end of each month using a rate based on
actual direct labor costs.

Required:

a. Determine the January overhead rate.

b. Determine the cost of each job.

c. Prepare a statement of cost of goods manufactured.

ANS:

a $52,000 =
MOH $4,000 + $10,000 +
. $2.4762/dl
$12,000 + $2,000 +
cost
$24,000 = $21,000 dl
cost

b J J J J J
O O O O O
B B B B B
. #7 #7 #7 #7 #7
05 06 07 08 09
DM - - $ $10 $ = $
3,0 ,00 1,0 20,0
00 0 00 00
DL $ $ 5 6,0 4,0 = 21,0
2,0 4,0 , 00 00 00
00 00 0
0
0
MO 4,9 9,9 12 14, 9,9 = 52,0
H 52 05 ,3 857 05 00
81
B 13 14 =
e ,4 ,3 - - - 27
g 00 00 ,7
$20 $30 $20 00
W $20 $28 ,38 ,85 ,90
I ,35 ,20 1 7 5 $1
P 2 5 20,
70
0

c Beg
. WI $27,700
P
+ DM 20,000
+ DL 21,000
+ MOH 52,000
Downloaded by xxxx xxx
 JOB ORDER

- End WIP 72,143

$48,557

4. The Western Corporation, began operations on October 1. It employs a job order costing
system. Overhead is charged at a normal rate of $2.50 per direct labor hour. The actual
operations for the month of October are summarized as follows:

a. Purchases of raw material, 25,000 pieces @ $1.20/piece.

b. Material and labor costs charged to production:

Direct Direct
Job No. Units Material labor cost labor hours

Downloaded by xxxx xxx

 JOB ORDER

101 10,000 $4,000 $6,000 3,000

102 8,800 3,600 5,400 2,700
103 16,000 7,000 9,000 4,500
104 8,000 3,200 4,800 2,400
105 20,000 8,000 3,600 1,800

c. Actual overhead costs incurred:

Variable $18,500
Fixed 15,000

d. Completed jobs: 101, 102, 103, and 104

e. Sales-$105,000. All units produced on Jobs 101, 102, and 103 were sold.

Required: Compute the following balances on October 31:

a. Material inventory

b. Work in process inventory

c. Finished goods inventory

d. Cost of goods sold

e. Under- or overapplied overhead

ANS:

a. $30,000 - ($4,000 + $3,600 + $7,000 + $3,200 + $8,000) = $4,200

b. Job #105 $8,000 + $3,600 + ($1,800  2.50) = $16,100

c. Job #104 $3,200 + $4,800 + ($2,400  2.50) = $14,000

d. Job # 101 $4,000 + $6,000 + ($3,000  2.50) = $17,500

102 $3,600 + $5,400 + ($2,700  2.50) = 15,750
103 $7,000 + $9,000 + ($4,500  2.50) = 27,250
$60,500

e. Applied 14,400  $2.50 = $36,000

Actual 33,500
Overapplied $ 2,500

Steel Company.

Steel Company uses a job order costing system and develops its predetermined overhead rate
based on machine hours. The company has two jobs in process at the end of the cycle, Jobs
#177 and #179.

Budgeted overhead $100,300

Downloaded by xxxx xxx

 JOB ORDER

Budgeted machine hours 85,000

Raw material $ 63,000
Labor cost $ 50,000

5. Refer to Steel Company. What amount of overhead is charged to Jobs #177 and #179?
Machine hours are split between Jobs #177 and #179-65 percent and 35 percent,
respectively. Actual machine hours equal budgeted machine hours.

ANS:
OH Applied = MH Cost  POHR
Job #177: 85,000 MH  65%= 55,250  $1.18 = $65,195
Job #179: 85,000 MH  35%= 29,750  $1.18 = $35,105

6. Refer to Steel Company. Fifty-four percent of raw material belongs to Job 17 and 38 percent
belongs to Job 179, and the balance is considered indirect material. What amount of raw
material used was allocated to overhead as indirect material?

ANS:
54% + 38% = 92%; this means that 8% is indirect or $5,040
(.08  $63,000).

7. Refer to Steel Co. Labor cost was split 25 percent and 70 percent, respectively, between Jobs
#177 and #179 for direct labor. The remainder was indirect labor cost. What are the total costs
of Jobs #177 and #179?

ANS:

Job #177 Job #179

DM $ 34,020 $23,940
DL 12,500 35,000
MOH 65,195 35,105
$111,715 $94,045

8. Sanderson Company manufactures custom-built conveyor systems for factory and

commercial operations. Erin Smith is the cost accountant for Sanderson and she is in the process
of educating a new employee, Heather Fontenot about the job order costing system that Sanderson
uses. (The system is based on normal costs; overhead is applied based on direct labor cost and
rounded to the next whole dollar.) Lisa gathers the following job order cost records for July:

Direct Direct Total

Job No. Materials Labor Applied OH Cost
667 $ 5,901 $1,730 $ 1,990 $ 9,621
669 18,312 1,810 2,082 22,204
670 406 500 575 1,481
671 51,405 9,500 10,925 71,830
672 9,615 550 633 10,798

Downloaded by xxxx xxx

 JOB ORDER

To explain the missing job number, Erin informed Heather that Job #668 had been completed in
June. She also told her that Job #667 was the only job in process at the beginning of July. At
that time, the job had been assigned $4,300 for direct material and $900 for direct labor. At the
end of July, Job #671 had not been completed; all others had. Erin asked Heather several
questions to determine whether she understood the job order system.

Required: Help Heather answer the following questions:

a. What is the predetermined overhead rate used by ABC Company?

b. What was the total cost of beginning Work in Process inventory?

c. What was total prime cost incurred for the month of July?

d. What was cost of goods manufactured for July?

ANS:

a. Use any job started in July:

Rate = MOH JOB $670 $575 = 115%/DL Cost

DL COST $500

b. DM $4,300
DL 900
FOH 1,035 ($900  115%)
$6,235

c. Prime Cost =DM + DL

DM = $85,639 - 4,300 = $81,339

DL = 14,090 - 900 = 13,190
$94,529

d. COGM = $9,621 + 22,204 + 1,481 + 10,798 = $44,104

9. Perry Company uses a job order costing system and has the following information for the
first week of June:

1. Direct labor and direct materials used:

Job No. Direct Material Direct Labor Hours

498 $1,500 116
506 960 16
507 415 18
508 345 42
509 652 24
511 308 10
512 835 30
Total $5,015 256

Downloaded by xxxx xxx

 JOB ORDER

2. The direct labor wage rate is $4 per hour.

3. The overhead rate is $5 per direct labor hour.

4. Actual overhead costs for the week, $1,480.

5. Jobs completed: Nos. 498, 506, and 509.

6. The factory had no work in process at the beginning of the week.

Required:
a. Prepare a summary that will show the total cost assigned to each job.

b. Compute the amount of overhead over- or underapplied during the week.

c. Calculate the cost of the work in process at the end of the week.

ANS:
a. Job No. DM DL OH Total
498 $1,500 $ 464 $ 580 $2,544
506 960 64 80 1,104
507 415 72 90 577
508 345 168 210 723
509 652 96 120 868
511 308 40 50 398
512 835 120 150 1,105
$5,015 $1,024 $1,280 $7,319

b. Actual MOH $1,480

Applied MOH 1,280
Underapplied $ 200

c. JOB 507 $ 577

508 723
511 398
512 1,105
Ending WIP $2,803

10. You are asked to bring the following incomplete accounts of Andrepont Printing, Inc. up to date
through January 31,20X5. Consider the data that appear in the T-accounts as well as
additional information given in items (a) through (i).

Andrepont’s job order costing system has two direct cost categories (direct material and direct
manufacturing labor) and one indirect cost pool (manufacturing overhead, which is allocated
using direct manufacturing labor costs).

Materials Inventory Control Wages Payable Control

Downloaded by xxxx xxx

 JOB ORDER

12/31/20X4 1/31/20X5
Balance 15,000 Balance 3,000

Manufacturing Department
Work in Process Inventory Control Overhead Control
January20X5 Charges 57,000

Manufacturing Overhead Control

Finished Goods Inventory Control Cost of Goods Sold

12/31/20X4
Balance20,000

Additional Information:
a. Manufacturing department overhead is allocated using a budgeted rate set
every December. Management forecasts next year's overhead and next
year's direct manufacturing labor costs. The budget for 20X5 is $400,000
of direct manufacturing labor and $600,000 of manufacturing overhead.
b. The only job unfinished on January 31, 20X5 is No. 419, on which direct
manufacturing labor costs are $2,000 (125 direct manufacturing labor hours)
and direct material costs are $8,000.
c. Total material placed into production during January is $90,000.
d. Cost of goods completed during January is $180,000.
e. Material inventory as of January 31, 20X5 is $20,000.
f. Finished goods inventory as of January 31, 20X5 is $15,000.
g. All plant workers earn the same wage rate. Direct manufacturing labor hours
for January totals 2,500. Other labor and supervision totals $10,000.
h. The gross plant payroll on January paydays totals $52,000. Ignore
withholdings. All personnel are paid on a weekly basis.
i. All "actual" manufacturing department overhead incurred during January has
already been posted.

Required:
a. Material purchased during January
b. Cost of Goods Sold during January
c. Direct Manufacturing Labor Costs incurred during January
d. Manufacturing Overhead Allocated during January
e. Balance, Wages Payable Control, December 31, 20X4
f. Balance, Work in Process Inventory Control, January 31, 20X5
g. Balance, Work in Process Inventory Control, December 31, 20X4
h. Balance, Finished Goods Inventory Control, January 31, 20X5
i. Manufacturing Overhead underapplied or overapplied for January

ANS:

Downloaded by xxxx xxx

 JOB ORDER

a. $15,000 + Purchases - $20,000 = $90,000. Purchases = $95,000

b. $20,000 + $180,000 - $15,000 = $185,000

c. DL = $2,000 = $16/HR  2,500 HRS = $40,000

125

d. $600,000 = 150% DL cost  $40,000 = $60,000

$400,000

e. BEGIN + $50,000 - $52,000 = $3,000 BEGIN = $5,000

f. $2,000 + ($2,000  150%) + $8,000 = $13,000

g. BEGIN + $90,000 + $40,000 + $60,000 - $180,000 = $13,000 BEGIN =

$3,000

h. $20,000 + $180,000 - $185,000 = END = $15,000

i. APPLIED $60,000
ACTUAL 57,000
$ 3,000 overapplied

11. Beauty Company manufactures picture frames of all sizes and shapes and uses a job order
costing system. There is always some spoilage in each production run. The following costs relate
to the current run:

Estimated overhead (exclusive of spoilage) $160,000

Spoilage (estimated) $ 25,000
Sales value of spoiled frames $ 11,500
Labor hours 100,000

The actual cost of a spoiled picture frame is $7.00. During the year 170 frames are considered
spoiled. Each spoiled frame can be sold for $4. The spoilage is considered a part of all jobs.

a. Labor hours are used to determine the predetermined overhead rate. What is the
predetermined overhead rate per direct labor hour?
b. Prepare the journal entry needed to record the spoilage.
c. Prepare the journal entry if the spoilage relates only to Job #12 rather than being a
part of all production runs.

ANS:

a. $160,000 + $25,000 - $11,500 = $173,500

$173,500/100,000 = $1.735 per DLH
b. Disposal Value of Spoiled Work 680
Manufacturing Overhead 510
Work in Process Inventory 1,190
c. Disposal Value of Spoiled Work 680
Work in Process Inventory-Job #12 680

Downloaded by xxxx xxx

 JOB ORDER

Downloaded by xxxx xxx