Exam 3: Cost Accumulation for Job-Shop and Batch Production Operations

Chatam Company wrote a check to cover the rent for May. The total of the check was $20,000; the controller estimates that 80% of the square footage of the company was taken up by the factory and 20% by the accounting and administrative offices. The journal entry to record this check should be:

The general journal entry to record the issuance of materials represented by the following materials requisitions for the month includes:

The accounting journal entry to record the transfer of raw material needed for a production job consists of a debit to Work-in-Process inventory and a credit to Raw-Material inventory.

Readville Company inadvertently assigns a $50,000 advertising expense to Manufacturing Overhead. Readville Company has more inventory at the end of the year than at the beginning of the year. The result of this error will be to:

Stoughton applies overhead to production at a predetermined rate of 80% based on direct labor cost. Job 80, the only job still in process at the end of July, has been charged with direct labor of $20,000. The amount of direct materials charged to job 80 was: Stoughton Furniture uses a job-order cost system. The following debits (credits) appeared in the Work-in-Process inventory account for July 2007:

A credit to the Work-in-Process account will normally be accompanied by a debit to the Finished Goods account.

Which of the following companies would most likely use operation costing?

Process Costing treats each individual job as the unit of output and assigns, or allocates costs to each job as resources are used.

Use the following to answer questions: Key: BB = Beginning Balance EB = Ending Balance -The missing amount for letter d is:

What is a Gantt chart? Describe how a Gantt chart can help management to avoid cost overruns.

Transfers out of the Work-in-Process account represent increases to the Cost of Goods Sold account.

Use the following to answer questions: Key: BB = Beginning Balance EB = Ending Balance -The missing amount for letter b is:

When the amount of the overhead variance is immaterial, it is normally written off immediately as part of cost of goods sold.

Mok Company uses a predetermined cost-driver rate based on direct labor hours. For November, Mok's budgeted overhead was $1,200,000 based on a budgeted activity of 400,000 direct labor hours. Actual overhead was $1,300,000 with actual direct labor hours totaling 440,000. Required: Calculate the over or under applied overhead for November.

Ryan Brooks Architecture does custom architectural designs for individuals and corporations. The company employs two assistants, who are paid $30 per hour. Clients are billed $100 per hour for the work of the assistants and $150 per hour for Mr. Brooks' design services. During July 2007, the assistants worked a total of 300 hours for Bridgewater Savings Bank and 200 hours for a custom designed house for Mr. and Mrs. Rodman. Mr. Brooks worked 200 hours, spending 75% of his time on the Bridgewater Savings Bank job and 25% on Mr. and Mrs. Rodman's job. There were 100 labor hours that were not billable to clients. Overhead costs of $20,000 were incurred and assigned to clients on the basis of labor hours. Marketing and administrative costs were $35,000. Required: (a) Compute the revenue and cost for each client. (b) Prepare an income statement for July, 2007.

The primary cost document for a job is called a job-cost record or job-cost sheet.

Framingham Company, which uses labor hours to apply overhead to manufacturing, may have increased amounts of underapplied manufacturing overhead at month-end if:

The Finished Goods account collects the total cost of all jobs completed and sold during the accounting period.

When a job is sold, Finished Goods will be credited for the selling price of the job.

In order to qualify for job-order costing, each job must consist of a single, unique product consisting of only one unit produced of relatively high value.