EASY ROUND

EASY 1

Job cost sheets contain entries for actual direct material, actual direct labor, and actual
manufacturing overhead cost incurred in completing a job.

Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking

AICPA FN: Reporting LO: 2 Level: Easy

EASY 2

The following entry would be used to record depreciation on manufacturing equipment:

Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking

AICPA FN: Reporting LO: 4 Level: Medium

EASY 3

Including manufacturing overhead costs in product costs ensures that each product will earn a
profit.

Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking

AICPA FN: Reporting LO: 5 Level: Medium

EASY 4

A good description of “cost of goods manufactured” is the recorded cost of the:

A) units completed during the period.
B) units started and completed during the period.
C) work done on all units during the period.
D) work done this period on units completed this period.

Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking

AICPA FN: Reporting LO: 6 Level: Medium

EASY 5
In a job-order costing system, the cost of a completed but unsold job is:
A) closed to Cost of Goods Sold.
B) part of the Work in Process inventory balance.
C) adjusted to exclude any applied overhead.
D) part of the Finished Goods inventory balance.

Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking

AICPA FN: Reporting LO: 7 Level: Medium

EASY 6

The job cost sheet:

A) summarizes all costs charged to a particular job.
B) contains only direct costs such as direct materials and direct labor.
C) is discarded after production is completed on a particular job.
D) is useful only in process costing.

Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking

AICPA FN: Reporting LO: 2 Level: Medium

EASY 7

What source document is used to determine the actual amount of direct materials to record on a
job cost sheet?
A) bill of materials
B) production order
C) materials purchase order
D) materials requisition form

Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking

AICPA FN: Reporting LO: 2 Level: Medium

EASY 8

In a predetermined overhead rate in a job-order costing system that is based on machine-hours,

which of the following would be used in the numerator and denominator?

Numerator Denominator
A) Actual manufacturing overhead Actual machine-hours
B) Actual manufacturing overhead Estimated machine-hours
C) Estimated manufacturing overhead Actual machine-hours
D) Estimated manufacturing overhead Estimated machine-hours
 Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 3 Level: Easy Source: CPA, adapted

EASY 9

Elliott Company uses a predetermined overhead rate based on machine-hours to apply

manufacturing overhead to jobs. The company manufactures tools to customer specifications.
The following data pertain to Job 1501:

Direct materials used ....................................................... $4,200

Direct labor-hours worked ............................................... 300
Direct labor rate per hour ................................................. $8.00
Machine-hours used ......................................................... 200
Predetermined overhead rate per machine-hour .............. $15.00

What is the total manufacturing cost recorded on Job 1501?

B) $9,600
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting
LO: 2,5 Level: Easy Source: CPA, adapted

Solution:

Direct materials used ....................................................................... $4,200

Direct labor (300 hours × $8.00 per hour) ....................................... 2,400
Manufacturing overhead applied (200 hours × $15.00 per hour) .... 3,000
Total manufacturing cost for job 1501 ............................................ $9,600

EASY 10

Heller Cannery, Inc., uses a predetermined overhead rate based on machine-hours to apply
manufacturing overhead to jobs. The company estimated that it would incur $510,000 in
manufacturing overhead during the year and that it would work 100,000 machine-hours. The
company actually worked 105,000 machine-hours and incurred $540,000 in manufacturing
overhead costs. By how much was manufacturing overhead underapplied or overapplied for the
year?

B) $4,500 underapplied

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting
LO: 3,5,8 Level: Medium Source: CPA, adapted

Solution:

Actual manufacturing overhead ...................................................... $540,000

 Applied manufacturing overhead
($5.10 per DLH* × 105,000 DLHs) ........................................... 535,500
Manufacturing overhead underapplied............................................ $ 4,500
*Predetermined overhead rate = $510,000 ÷ 100,000 machine-hours
= $5.10 per machine-hour

AVERAGE 1

186. Helmer Sporting Goods Company manufactured 100,000 units in 20X5and reported the
following costs:

Sandpaper $ 64,000 Leasing costs — plant $ 768,000

Materials handling 640,000 Depreciation — equipment 448,000
Coolants & lubricants 44,800 Property taxes — equipment 64,000
Indirect manufacturing labor 550,400 Fire insurance — equipment 32,000
Direct manufacturing labor 4,352,000 Direct material purchases 6,272,000
Direct materials, 1/1/X9 768,000 Direct materials, 12/31/X9 550,400
Finished goods, 1/1/X9 1,344,000 Sales revenue 25,600,000
Finished goods, 12/31/X9 2,560,000 Sales commissions 1,280,000
Work-in-process, 1/1/X9 192,000 Sales salaries 1,152,000
Work-in-process, 12/31/X9 128,000 Advertising costs 960,000
Administration costs 1,600,000

Required: What is cost of goods sold for 20X9?

Answer:

a. $384,000 + $3,136,000 – $275,200 = $3,244,800

b. $3,244,800 + $2,176,000 + $32,000 + $320,000 + $22,400 + $275,200 + $384,000 +

$224,000 + $32,000 + $16,000 = $6,726,400

c. $6,726,400 + $96,000 – $64,000 = $6,758,400

d. $6,758,400 + $672,000 – $1,280,000 = $6,150,400x2=12,300,800

Difficulty: 3 Objectives: 6, 7 Terms to Learn: cost of goods

manufactured
AVERAGE 2
Messinger Manufacturing Company had the following account balances for the quarter ending
March 31, unless otherwise noted:

Work-in-process inventory (January 1) $ 70,200

Work-in-process inventory (March 31) 85,500
Finished goods inventory (January 1) 270,000
Finished goods inventory (March 31) 255,000

Direct materials used 189,000

Indirect materials used 42,000
Direct manufacturing labor 240,000
Indirect manufacturing labor 93,000

Property taxes on manufacturing plant building 14,400

Salespersons' company vehicle costs 6,000
Depreciation of manufacturing equipment 132,000
Depreciation of office equipment 61,800

Miscellaneous plant overhead 67,500

Plant utilities 46,200
General office expenses 152,700
Marketing distribution costs 15,000

Required: Prepare a cost of goods sold schedule for the quarter.

 Answer:

a. Messinger Manufacturing Company

Cost of Goods Manufactured Schedule
For quarter ending March 31

Direct materials used $ 378,000

Direct manufacturing labor 480,000
Manufacturing overhead

Depreciation of manufacturing equipment $264,000

Indirect manufacturing labor 186,000
Indirect materials 84,000
Miscellaneous plant overhead 135,000
Plant utilities 92,400
Property taxes on building 28,800 790,200
Manufacturing costs incurred $1,648,200
Add beginning work-in-process inventory 140,400
Total manufacturing costs $1,788,600
Less ending work-in-process inventory 171,000
Cost of goods manufactured $1,617,600

b. Messinger Manufacturing Company

Cost of Goods Sold Schedule
For the quarter ending March 31

Beginning finished goods inventory $ 540,000

Cost of goods manufactured 1,617,600
Cost of goods available for sale 2,157,600
Ending finished goods inventory (510,000)
Cost of goods sold $1,647,600 /2

823,800

Difficulty: 2 Objectives: 6, 7 Terms to Learn: cost of goods

manufactured

AVERAGE 3

Teddy Company is to submit a bid on the production of 5,500 vases. It is estimated that the cost
of materials will be $8,500, and the cost of direct labor will be $12,000. Factory overhead is
applied at 50% of direct labor cost in the Molding Department and at $7.50 per direct labor hour
in the Finishing Department. Of the above direct labor, it is estimated that 500 direct labor hours
at a cost of $4,000 will be required in Finishing. The company wishes a markup of 100% of its
total production cost.
Determine the following (1) Estimated prime cost and (2) Estimated conversion cost.

SOLUTION

(1) Materials ....................................................................................................... $ 8,500

Direct labor ................................................................................................... 12,000
Factory overhead:
Molding (50% x $8,000) ......................................................................... 4,000
Finishing (500 DLH x $7.50) .................................................................. 3,750
Estimated cost to produce ........................................................................... $ 28,250

(2) Materials ....................................................................................................... $ 8,500

Direct labor ................................................................................................... 12,000
Estimated prime cost ................................................................................... $ 20,500

(3) Direct labor ................................................................................................... $ 12,000

Factory overhead ......................................................................................... 7,750
Estimated conversion cost ........................................................................... $ 19,750

(4) Estimated cost to produce ........................................................................... $ 28,250

Markup ($28,250 x 100%)........................................................................... 28,250
Bid price ........................................................................................................ $ 56,500

AVERAGE 4

The work in process account of Meyers Company showed:

Work in Process
Materials $22,000 | Finished goods $68,000
Direct labor 37,000 |
Factory overhead 55,500 |

Materials charged to the one job still in process amounted to $5,000. Factory overhead is
applied as a predetermined percentage of direct labor cost.

Compute the following (1) the amount of direct labor cost in finished goods and (2) the
amount of factory overhead in finished goods.

SOLUTION

(1) The amount of direct labor in finished goods:

Finished goods ................................................................................................... $68,000
Materials included in finished goods ............................................................... 17,000
Direct labor and factory overhead in finished goods..................................... $51,000
 Factory overhead charged to work in process $55,500
= = 1.5
Direct labor charged to work in process $37,000

Let x = direct labor in finished goods

2.5x = $51,000 direct labor and factory overhead in finished goods
x = $20,400 direct labor in finished goods

(2) The amount of factory overhead in finished goods:

x = $20,400
1.5x = 1.5($20,400)
1.5x = $30,600 factory overhead in finished goods

AVERAGE 5

The Watson Tool Corporation, which commenced operations on August 1, 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 August 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
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 Cost of goods sold after Under- or overapplied overhead

 ANSWER:

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

AVERAGE 6

The Palmer Company had the following inventories at the beginning and end of July:

July 1 July 31
Materials ........................................................................................... $20,000 $ 45,000
Work in process ................................................................................ ? 185,000
Finished goods .................................................................................. 65,000 115,000

During July, the cost of materials purchased was $160,000 and factory overhead of
$125,000 was applied at a rate of 75% of direct labor cost. July cost of goods sold was
$240,000.

Required: Prepare completed T accounts showing the flow of the cost of goods
manufactured and sold.

SOLUTION

Materials Work in Process

Inv. 20,000 | WIP135,000
Inv. 48,333 ** | FG 290,000
Purch. 160,000 | Materials 135,000 |
180,000 | Factory |
45,000 | overhd. 125,000 |
| Labor 166,667 |
| 475,000 |
| 185,000 |

Finished Goods Cost of Goods Sold

Inv. 65,000 | CGS 240,000 FG 240,000 |
WIP 290,000* | |
355,000 | |
115,000 | |

CGA-Canada (adapted). Reprinted with permission.

*Beginning inventory + WIP = Ending inventory + CGS

$65,000 + WIP = $115,000 + $240,000
WIP = $290,000

**Beginning WIP + Mfg. costs = Ending WIP + FG

Beginning WIP + $426,667 = $185,000 + $290,000
Beginning WIP = $48,333

AVERAGE 7

Job Order Cost Sheet; Over- or Underapplied Overhead. During June, the following
transactions took place at the Cassandran Corp.

June 3 Purchased materials, $30,000.

5 Requisitioned materials from inventory, $20,000 (75% of these were direct;
25% were indirect). Direct materials of $3,000 and indirect materials of $1,000
were for Job 00-1. The remainder were for Job 00-2.
7 For Job 00-2, returned $150 of direct materials and $200 of indirect materials.
8 Recorded liabilities for payroll: direct labor, $15,000 and indirect labor, $5,000.
Of the direct labor cost, 60% was for Job 00-1; the remainder was for Job 00-2.
10 Incurred other factory overhead costs, $20,000 (all applicable to Jobs 00-1 and
00-2).
14 Applied overhead at the rate of 200% of direct labor cost to Jobs 00-1 and 00-2,
which were completed and transferred to finished goods account today.
Required: Assuming that Jobs 00-1 and 00-2 were the only jobs during the period and that all
overhead (as recorded above) is the total applicable overhead for these projects, determine the
difference between applied and actual overhead for the month.

SOLUTION

(1)
Job 00-1 Job 00-2
Materials ................................................................................................ $ 3,000 $ 11,850
Labor...................................................................................................... 9,000 6,000
Overhead applied.................................................................................. 18,000 12,000
Total cost ............................................................................................... $ 30,000 $ 29,850

(2) Analysis of Factory Overhead

Incurred:
Indirect materials ............................................................................ $ 4,800
Indirect labor ................................................................................... 5,000
Other overhead incurred ................................................................ 20,000 $ 29,800
Applied:
Job 00-1 ............................................................................................ $ 18,000
Job 00-2 ............................................................................................ 12,000 30,000
Amount overapplied ............................................................................ $ (200 )

192. The following calendar year information about the Tchulahota Corporation is available
on December 31:

Advertising expense…………………………… $ 28,800

Depreciation of factory equipment…………… 42,320
Depreciation of office equipment…………….. 10,800
Direct labor…………………………………… 142,600
Factory utilities………………………………... 35,650
Interest expense………………………………... 6,650

Inventories, January 1:
Raw materials…………………………… 3,450
Work in Process………………………… 17,250
Finished goods…………………………... 35,600
Inventories, December 31:
Raw materials…………………………….. 2,300
Work in Process………………………….. 20,700
Finished goods…………………………… 31,050
Raw materials purchases……………………… 132,450
Rent on factory building……………………… 41,400
Indirect labor………………………………….. 51,750
Sales commissions…………………………….. 16,500

The company applies overhead on the basis of 125% of direct labor costs. Calculate the
amount of over- or underapplied overhead.

Answer: Factory overhead costs:

Depreciation of factory equipment …………… $ 42,320
Factory utilities ……………………………….. 35,650
Rent on factory building ……………………… 41,400
Indirect labor ………………………………….. 51,750
Total actual factory overhead costs ………….. $171,120
 Factory overhead applied (142,600 * 125%) … $178,250
Overapplied overhead ………………………… $ 7,130

AVERAGE 9

The predetermined overhead rate for Shilling Manufacturing is based on estimated direct
labor costs of $350,000 and estimated factory overhead of $770,000. Actual costs incurred
were:

Direct materials ............................................................ $475,000

Direct labor................................................................... 347,000
Indirect materials.......................................................... 78,000
Indirect labor ................................................................ 143,500
Sales commissions ....................................................... 150,000
Factory depreciation..................................................... 260,000
Property taxes, factory ................................................. 35,000
Factory utilities ............................................................ 65,000
Advertising................................................................... 62,500
Factory supervision ...................................................... 185,000

a. Calculate the predetermined overhead rate and calculate the overhead applied during the
year.
b. Determine the amount of over- or underapplied overhead and prepare the journal entry to
eliminate the over- or underapplied overhead assuming that it is not material in amount.

Answer:

a. Predetermined overhead rate = $770,000/$350,000 = 220% of direct labor cost

Overhead applied = $347,000 * 220% = $763,400
b.
Actual overhead:
Indirect materials....................................... $ 78,000
Indirect labor ............................................. 143,500
Factory depreciation ................................. 260,000
Property taxes, factory............................... 35,000
Factory utilities.......................................... 65,000
Factory supervision ................................... 185,000
Total actual overhead .................................. $766,500
Overhead applied......................................... 763,400
Underapplied overhead ............................... $ 3,100

Cost of Goods Sold .......................................................... 3,100

Factory Overhead................................................... 3,100

AVERAGE 10
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

DIFFICULT 1

The Luna Manufacturing Company has the following job cost sheets on file. They represent
jobs that have been worked on during September of the current year. This table summarizes
information provided on each sheet:

Number Total Cost Incurred Status of Job

951 $ 4,200 Finished and delivered
952 $ 7,700 Unfinished
953 $ 9,300 Finished and unsold
954 $11,100 Finished and delivered
955 $ 3,000 Finished and unsold
956 $ 5,500 Finished and delivered
957 $35,000 Unfinished
958 $ 3,200 Finished and delivered
959 $ 500 Unfinished
960 $22,110 Unfinished
961 $ 7,200 Finished and delivered
 962 $ 8,500 Unfinished
963 $11,200 Finished and unsold

Required:
(a) What is the cost of the Work in Process inventory on September 30?
(b) What is the cost of the finished goods inventory on September 30?
(c) What is the cost of goods sold for the month of September?

Answer:
(a) Cost of the Work in Process inventory on September 30:

Number Total Cost Incurred Status of Job

952 $ 7,700 Unfinished
957 35,000 Unfinished
959 5 00 Unfinished
960 22,110 Unfinished
962 8,500 Unfinished
Total $73,810

(b) Cost of the finished goods inventory on September 30:

Number Total Cost Incurred Status of Job

953 $ 9,300 Finished and unsold
955 3,000 Finished and unsold
963 11,200 Finished and unsold
Total $23,500
 (c) Cost of goods sold for September:

Number Total Cost Incurred Status of Job

951 $ 4,200 Finished and delivered
954 11,100 Finished and delivered
956 5,500 Finished and delivered
958 3,200 Finished and delivered
961 7,200 Finished and delivered
Total $31,200

DIFFICULT 2

Drop Anchor takes special orders to manufacture sail boats for high end customers. Complete the job
cost sheets for Drop Anchor for September based on the following information. Prepare journal entries
to record the transactions as well as post to the job cost sheets.
a. Purchased raw materials on credit, $145,000.
b. Materials requisitions: Job 240, $48,000; Job 241, $36,000; Job 242, $42,000; indirect
materials were $12,000.
c. Time tickets used to charge labor to jobs: Job 240, $40,000; Job 241, $30,000; Job 242,
d. $35,000, indirect labor is $25,000.
e. The company incurred the following additional overhead costs: depreciation of factory
building, $70,000; depreciation of factory equipment, $60,000; expired factory
insurance,
f. $10,000; utilities and maintenance cost of $20,000 were paid in cash.
g. Applied overhead to all three jobs. The predetermined overhead rate is 190% of direct labor
cost.
h. Transferred jobs 240 and 242 to Finished Goods Inventory.
i. Sold job 240 for $300,000 for cash.
j. Closed the under- or over-applied overhead account balance.

Required: Compute for the total costs of Job 240, 241 and 242.

Job Cost Sheets

240 241 242 Total
For the current month
Direct materials
Direct labor Applied overhead

Total costs

Answer:

a. Raw Materials Inventory ..................................................... 145,000

Accounts Payable .................................................... 145,000
b. Work in Process Inventory .................................................. 126,000
Raw Materials Inventory......................................... 126,000
Factory Overhead................................................................ 12,000
Raw Materials Inventory......................................... 12,000

c. Work in Process Inventory .................................................. 105,000

Factory Wages Payable .......................................... 105,000
Factory Overhead................................................................ 25,000
Factory Wages Payable .......................................... 25,000

d. Factory Overhead................................................................ 160,000

Accumulated Depreciation—Factory Building....... 70,000
Accumulated Depreciation—Factory Equip. .......... 60,000
 Prepaid Insurance................................................... 10,000
Cash ........................................................................ 20,000

e. Work in Process Inventory .................................................. 199,500

Factory Overhead ($105,000 * 190%)................... 199,500

f. Finished Goods Inventory ($164,000 + $143,500) ............. 307,500

Work in Process Inventory ...................................... 307,500

g. Cash….………………………………………………. 300,000
Sales ........................................................................ 300,000
Cost of Goods Sold .............................................................. 164,000
Finished Goods Inventory ....................................... 164,000

h. Factory Overhead................................................................ 2,500

Cost of Goods Sold.................................................. 2,500
Overhead = $12,000 + 25,000 + 160,000 = $197,000
Overhead applied = 199,500
Overapplied overhead = $ 2,500

Job Cost Sheets

240 241 242 Total
For the current month
Direct materials 48,000 36,000 42,000 126,000
Direct labor 40,000 30,000 35,000 105,000
Applied overhead 76,000 57,000 66,500 199,500

Total costs 164,000 123,000 143,500 430,500

DIFFICULT 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 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: Compute the cost of goods manufactured.

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

costb.JOB#705JOB#706JOB#707JOB#708JOB#709DM- - $ 3,000 $10,000 $ 1,000 = $ 20,000DL$ 2,000 $ 4,000 5,000 6,000
4,000 = 21,000MOH4,952 9,905 12,381 14,857 9,905 = 52,000Beg WIP 13,400 14,300 - -
- = 27,700 $20,352 $28,205 $20,381 $30,857 $20,905 $120,700140
c. Beg WIP$27,700+ DM20,000+ DL21,000+ MOH 52,000- End WIP 72,143

$48,557

DIF: Moderate OBJ:

DIFFICULT 4
Calwell Corp. uses a job order costing system. Four jobs were started during the current year. The
following is a record of the costs incurred:

MaterialDirect Labor Direct Labor

Job # Used Used Hours Used
1010 $45,000 $72,000 8,000
1011 59,000 77,000 7,000
1012 35,000 30,000 3,000
1013 26,000 40,000 5,000

Actual overhead costs were $55,800. The predetermined overhead rate is $2.40 per direct labor
hour. During the year, Jobs 1010, 1012, and 1013 were completed. Also, Jobs 1010 and 1013 were
sold for $387,000. Assuming that this is Calwell’s first year of operations:

Required:
(1) Work in Process Inventory
(2) Finished Goods Inventory, and
(3) Cost of Goods Sold after over- or underapplied overhead?

Answer:
 Job Direct Direct labor Overhead Total job
No. materials applied* cost
1010 $45,000 $72,000 $19,200 $136,200
1011 59,000 77,000 16,800 152,800
1012 35,000 30,000 7,200 72,200
1013 26,000 40,000 12,000 78,000
Totals $165,000 $219,000 $55,200 $439,200

Job 1010: 8,000 hours * $2.40/hour = $19,200

Job 1011: 7,000 hours * $2.40/hour = $16,800
Job 1012: 3,000 hours * $2.40/hour = $7,200
Job 1013: 5,000 hours * $2.40/hour = $12,000

Work in Process Inventory ………………….. 165,000

Raw Materials Inventory ………………….. 165,000

Work in Process Inventory ………………….. 219,000

Factory Wages Payable …………………………… 219,000
 Work in Process Inventory ………………….. 55,200
Factory Overhead ………………………... 55,200

Finished Goods Inventory …………………… 286,400

Work in Process Inventory ……………… 286,400
($136,200 + $72,200 + $78,000) = $286,400

Cost of Goods Sold …………………………. 214,200

Finished Goods Inventory ………………. 214,200
($136,200 + $78,000 = $214,200)

Accounts Receivable ………………………… 387,000

Sales …………………..…………………. 387,000
Work in Process Inventory: Job
(b) 1011 $152,800
Finished Goods: Job 1012

$72,200 Factory Overhead:

Applied $55,200
Actual 55,800
$ 600 debit balance
(underapplied)
(1) 152,800
(2) 72,200
(3) 214,800

DIFFICULT 5

Voyager Inc. produces customized vans in a job order shop. On November 1, the following
balances appear in the inventory records:

Finished goods ............................................................................................................ $179,000

Work in process .......................................................................................................... 308,000
Materials ..................................................................................................................... 83,000

The amount in Finished Goods represents $101,000 recorded for Van 175 and $78,000
recorded for Van 177. The work in process account represents the three vans in process, as
follows:

Van 179 Van 180 Van 181

Factory overhead ............................................................ $75,000 $50,000 $25,000
Direct labor ..................................................................... 60,000 40,000 20,000
Direct materials .............................................................. 26,000 7,000 5,000
The following transactions occurred during November:
(a) Purchased materials on account, $80,000.
(b) Requisitioned $60,000 of materials from inventory: $15,000 applied to Van 180, $25,000 to
Van 181, and $16,000 to Van 182, a new order; the balance was for indirect materials.
(c) Recorded the liability for the payroll and the labor cost distribution in a single entry: total
payroll, $208,750. Of the payroll cost, 10% applied to Van 179, 20% to Van 180, 35% to
Van 181, 30% to Van 182, and the remainder to indirect labor.
(d) Paid the payroll.
(e) Applied factory overhead at the rate of 150% of direct labor cost.
(f) Completed Vans 179 and 180.
(g) Sold Vans 175, 177, and 180 at 50% over manufacturing costs.

Required: Compute for the Cost of Goods Sold after over- or underapplied overhead?

SOLUTION

Debit Credit
(a) Materials .................................................................................... 80,000
Accounts Payable ................................................................ 80,000

(b) Factory Overhead Control ....................................................... 4,000

Work in Process ........................................................................ 56,000
Materials .............................................................................. 60,000

(c) Factory Overhead Control ....................................................... 10,437

Work in Process ........................................................................ 198,313
Accrued Payroll .................................................................. 208,750

(d) Accrued Payroll ......................................................................... 208,750

Cash ...................................................................................... 208,750

(e) Work in Process ........................................................................ 297,470

Applied Factory Overhead ................................................. 297,470

(f) Finished Goods .......................................................................... 429,563

Work in Process .................................................................. 429,563

(g) Accounts Receivable.................................................................. 593,063

Sales ...................................................................................... 593,063

Cost of Goods Sold .................................................................... 395,375

Finished Goods .................................................................... 395,375
 DIFFICULT 6

A company uses a job order costing system and applies overhead on the basis of direct
labor cost. A summary of the company's Work in Process Inventory account for December
appears below.

Work in Process
Date Explanation PR Debit Credit Balance
Dec. 1 73,800
Dec. Direct Materials G-20 235,800 309,600
Dec. Direct Labor G-20 117,000 426,600
Dec. Factory Overhead G-20 187,200 613,800
Dec. Job No. 5 completed G-8 90,900 522,900
Dec. Job No. 6 completed G-10 131,400 391,500
Dec. Job No. 7 completed G-12 73,800 317,700
Dec. 31 Job No. 8 completed G-15 168,300 149,400

Fill in the blanks for the following:

(1) Job No. 6 had $26,550 of direct labor cost. Therefore, the job must have had $
of direct materials cost.
(2) Job No. 8 had $73,998 of direct materials cost. Therefore, the job must have had
$ of factory overhead cost.

Answer:
(1) $149,400 (ending balance of account)
(2) ($187,200/$117,000) * 100% = 160%
(3) $26,550 * 160% = $42,480; $131,400 – $26,550 – $42,480 = $62,370
(4) $168,300 – $73,998 = $94,302 Direct labor + OH; $94,302/2.60 = $36,270 OH = $94,302 – $36,270 =
$58,032

DIFFICULT 7
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

12/31/20X4 1/31/20X5
Balance 15,000 Balance 3,000
 Manufacturing Department
Work in Process Inventory Control Overhead Control
January 20X5
Charges 57,000

Manufacturing Overhead Control

Finished Goods Inventory Control Cost of Goods Sold

12/31/20X4
Balance 20,000

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: Balance, Work in Process Inventory Control, December 31, 20X4 BEGIN = $3,000

ANS:

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

DIF: Moderate OBJ: 4-4

DIFFICULT 8,9,10

MOB Corp. maintains an internet-based general ledger. Overhead is applied on the basis of
direct labor costs. Its bookkeeper accidentally deleted most of the entries that had been
recorded for January. A printout of the general ledger (in T-account form) showed the
following:

Raw Materials Inventory Work in Process Inventory

DR CR DR CR
Ba1.1/1 10,000 Bal 1/1 4,000 f)
a) b) c)
d)
e)
Bal 17,500 (Bal 1/31) g)

Accounts Payable Finished Goods Inventory

DR CR DR C
h) Bal. 1/1 5,000 j) l)
i) k)
Bal. 1/31 9,000 Bal. 1/31 15,000

Factory Overhead Cost of Goods Sold

DR CR DR CR
m) n) o)

A review of the prior year's financial statements, the current year's budget, and January's
source documents produced the following information:
(1) Accounts Payable is used for raw material purchases only. January purchases were
$49,000.
(2) Factory overhead costs for January were $17,000 none of which is indirect materials.
(3) The January 1 balance for finished goods inventory was $10,000.
(4) There was a single job in process at January 31 with a cost of $2,000 for direct materials
and $1,500 for direct labor.
 (5) Total cost of goods manufactured for January was $90,000.
(6) All direct laborers earn the same rate ($13/hour). During January, 2,500 direct labor hours
were worked.
(7) The predetermined overhead rate is based on direct labor costs. Budgeted (expected)
overhead for the year is $195,000 and budgeted (expected) direct labor is $390,000.

Fill in the missing amounts a through o above in the T-accounts above.

Answer:

Raw Materials Inventory Work in Process Inventory

DR CR DR CR
Bal 1/1 10,000 Bal 1/1 4,000
a) 49,000 b) 41,500 c) DM 41,500
 d) DL 32,500
e) OH 16,250 f) COGM 90,000
Bal 1/31 17,500 g) Bal 1/31 4,250

Accounts Payable Finished Goods Inventory

DR CR DR CR
h) 45,000 Bal. 1/1 5,000 j) Bal 1/1 10,000
i) 49,000
k) COGM 90,000 1) 85,000
Bal. 1/31 9,000 Bal. 1/31 15,000

Factory Overhead Cost of Goods Sold

DR CR DR CR
m) OH 17,000 n) OH 16,250 o) 85,000
(actual) (applied)