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

Precision Measurement Company manufactures precision-measuring devices used by industrial companies in various capacities. The devices are produced in two stages: Assembly and Testing. The company has no beginning inventories because all units produced last year were sold by the end of the year. At the beginning of the year, the company has an order of 8,000 units. The company's predetermined overhead rate is based on materials used in assembly and direct labor hours in testing. Information concerning the predetermined overhead rates appears below: Direct labor is paid $20 per hour. Required: (a) Compute the predetermined overhead rate for each department. (b) Calculate the total and per unit cost of producing 8,000 units. (c) Determine the manufacturing overhead variance in each department and for the company as a whole.

A Gantt chart:

Hudson Company incurred $50,000 of depreciation expense on factory equipment and $20,000 for a copy machine located in the sales manager's office. The journal entry to record this should be:

The basic cost flow equation in job order costing is: Beginning balance + resource transfers out - resource transfers in = ending balance.

Job 100 incurred 700 machine hours in Department 1 and 75 in department 2 and 200 manufacturing labor hours in department 1 and 250 in department 2. The company uses a budgeted departmental overhead rate for applying overhead to production. Job 100 consisted of 3,000 lamps. Required: Calculate the total cost and per unit cost of Job 100. Osterville Manufacturing produces lamps for large department stores. For 2007, the two production departments had budgeted allocation bases of 100,000 machine hours in Dept 1 and 50,000 direct manufacturing labor hours in Department 2. The budgeted manufacturing overheads for 2007 were $1,200,000 for Dept. 1 and $1,000,000 for Dept. 2. For Job 100, the actual costs incurred in the two departments were as follows:

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

Given the following: Transfers In $30,000; Transfers Out: $36,000; Ending Inventory: $6,000. What was the beginning balance?

A debit to Finished- Goods-Inventory will normally be offset by a credit to cost of goods sold.

Manufacturing Overhead applied was $60,000, while actual overhead incurred was $62,000. Which of the following is always true of this situation?

The predetermined overhead rate is computed by dividing the budgeted manufacturing overhead cost for the month by the budgeted direct-labor hours for the month.

The difference between actual and applied overhead will eventually be expensed, regardless of whether it is written off immediately or prorated.

Job costing or job-order costing treats each individual job as the unit of output and assigns, or allocates costs to each job as resources are used.

Fill in the missing items for the following inventories

The Work- in- Process Inventory account of Charles River Corporation has a balance of $4,800 at the end of an accounting period. The job cost sheets of two incomplete jobs show charges of $800 and $400 for materials used and charges of $600 and $1,000 for direct labor used. From this information, it appears that Charles River is using a predetermined rate, as a percentage of direct labor costs of:

Predetermined overhead rates are used because they are more accurate than using actual costs.

Traditional systems tend to focus on only the production component of the value chain.

The accounting journal entry to record factory supervisors' salaries consists of a debit to Work-in-Process inventory and a credit to Wages Payable.

In a job-order costing system, the entry to requisition $1,000 of factory supplies from Raw- Materials inventory would be recorded with a:

When the amount of the overhead variance is material, it is normally prorated to the Materials and Finished goods accounts.

At year-end, the company's overhead T account showed the following: Kennedy Company uses a job order costing system with overhead applied to units using a predetermined rate based on direct labor hours. At the beginning of the year, the company developed a predetermined rate with the following information: Required: a) Determine the actual direct labor hours incurred b) Determine the overhead variance. Calculate the separate components of the overhead variance. c) What are the possible treatments of the overhead variance at year-end?