Document 80

MGMT 5006 Quiz 3, Submitted by: Abhaas Kalia, 13142
Ex 3-1
Which method of determining product costs—job-order costing or process costing—would be more
appropriate in each of the following situations?
A law office - Process costing
A shop that customizes vans. -Job order costing
A custom home builder. - Process costing
A facility that makes SunRype apple juice. - Process costing
An auto repair shop. - Process costing
An Elmer’s glue factory. - Job order costing
A textbook publisher, such as McGraw-Hill. - Job order costing
A manufacturer of specialty chemicals. -Process costing
A Petro-Canada oil refinery. - Job order costing
A Bridgestone tire manufacturing plant. - Process order costing
An advertising agency. - Job order costing
A paper products mill. -job order costing
Job order costing tracks prime costs to assign direct material and direct labor to
individual products (jobs). Job order costing is a costing method which is used to
determine the cost of manufacturing each product. This costing method is usually
adopted when the manufacturer produces a variety of products which are different from
one another and needs to calculate the cost for doing an individual job
Process costing also tracks prime costs to assign direct material and direct labor to
each production department (batch). Process costing is a method of costing used
mainly in manufacturing where units are continuously mass-produced through one or
more processes. ... In process costing it is the process that is costed (unlike job costing
where each job is costed separately).
BRIEF EXERCISE 3–2
Using Job-Order Costing Documents [LO2 – CC4]

Cycle Gear Corporation has incurred the following costs on job W456, an order for 20 special sprockets
to be delivered at the end of next month:
Direct materials:
On April 10, requisition number 15673 was issued for 40 titanium blanks to be used in the special order.
The blanks cost $20 each.
On April 11, requisition number 15678 was issued for 420 hardened nibs also to be used in the special
order. The nibs cost $1.75 each.
Direct labour:
On April 12, Jamie Unser worked from 11:00 a.m. until 2:45 p.m. on job W456. He is paid $12.60 per
hour.
On April 18, Melissa Chan worked from 8:15 a.m. until 11:30 a.m. on job W456. She is paid $13.20 per
hour.
Required:
On what documents would these costs be recorded?
How much cost should have been recorded on each of the documents for job W456?
Ans Ex3-2
1.The direct materials and direct labor costs listed in the exercise would have been recorded on for
different documents: the materials requisition form for Job w456, the time ticket for Jamie Unser, the
time ticket for Melissa Chan, and the job cost sheet for Job W456.
1. The costs for Job W456 would have been recorded as follows:
Materials requisition form:
Quantity Unit Cost Total Cost
Blanks20 $15.00 $300
Nibs 480 $1.25 $600
= $900
Time ticket for Jamie Unser
Started Ended Time Completed Rate Amount Job Number
11:00 Am 2:45 PM 3.75 $9.60 $36.00 W456
Time ticket for Melissa Chan
Started Ended Time Completed Rate Amount Job Number
8:15 Am 11;30 AM 3.25 $12.20 $39.65 W456
Job Cost Sheet for Job W456
Direct Materials $900.00
Direct labor:
Jamie Unser $36.00
Melissa Chan $39.65
=$975.65
Computing the Predetermined Overhead Rate [LO3 – CC5]

Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labour-hours.
At the beginning of the year, it estimated that its total manufacturing overhead would be $540,000 and
the total direct labour would be 30,000 hours. Its actual total manufacturing overhead for the year was
$547,900, and its actual total direct labour was 31,000 hours.
Required:
Compute the company’s predetermined overhead rate for the year.
Ans: 3-3
Predetermined Overhead Rate = Estimated Manufacturing Overhead / Estimated DLH
= 540000/30000
= $18 per DLH
Preparing Journal Entries [LO4 – CC8]
Larned Corporation recorded the following transactions for the past month:
$180,000 in raw materials were purchased on account.
$171,000 in raw materials were requisitioned for use in production. Of this amount, $10,000 was for
indirect materials, and the remainder was for direct materials.
Page 103Total labour costs of $221,000 were incurred. Of this amount, $203,000 was for direct labour,
and the remainder was for indirect labour.
Manufacturing overhead costs of $375,000 were incurred.
Required:
Record the preceding transactions in journal entries
Ans: 3-4 JOURNAL ENTRIES
S.no. ACCOUNT TITLE DEBIT CREDIT
a. Raw Materials Inventory 180,000
Accounts Payable 180,000

b. Work in process inventory 161,000
Manufacturing overheads 10,000
Raw material inventory 171,000
c. Work in process inventory 203,000
Manufacturing overheads 18,000
Wages Payable 221,000
d. Manufacturing overheads 375,000
Accounts payable 375,000

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MGMT 5006 Quiz 3, Submitted by: Abhaas Kalia, 13142

BRIEF EXERCISE 3–2

Using Job-Order Costing Documents [LO2 – CC4]

Materials requisition form:

Quantity Unit Cost Total Cost

Blanks20 $15.00 $300

Nibs 480 $1.25 $600

Time ticket for Jamie Unser

Started Ended Time Completed Rate Amount Job Number

11:00 Am 2:45 PM 3.75 $9.60 $36.00 W456

Time ticket for Melissa Chan

Started Ended Time Completed Rate Amount Job Number

8:15 Am 11;30 AM 3.25 $12.20 $39.65 W456

Job Cost Sheet for Job W456

Direct Materials $900.00

Jamie Unser $36.00

Melissa Chan $39.65

BRIEF EXERCISE 3–3

Computing the Predetermined Overhead Rate [LO3 – CC5]

Compute the company’s predetermined overhead rate for the year.

Predetermined Overhead Rate = Estimated Manufacturing Overhead / Estimated DLH

= $18 per DLH

BRIEF EXERCISE 3–4

Preparing Journal Entries [LO4 – CC8]

$180,000 in raw materials were purchased on account.

Manufacturing overhead costs of $375,000 were incurred.

Record the preceding transactions in journal entries

Ans: 3-4 JOURNAL ENTRIES

S.no. ACCOUNT TITLE DEBIT CREDIT

a. Raw Materials Inventory 180,000

Accounts Payable 180,000

Manufacturing overheads 10,000

Raw material inventory 171,000

c. Work in process inventory 203,000

Manufacturing overheads 18,000

Wages Payable 221,000

d. Manufacturing overheads 375,000

Accounts payable 375,000

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