Exam 3: Product Costing and Cost Accumulation

The left (or debit) side of the Manufacturing Overhead account is used to accumulate:

Briefly describe the stages used in the two-stage allocation process for assigning overhead costs.

In the two-stage cost allocation process, costs are assigned from:

Throughout the accounting period, the right (or credit) side of the Manufacturing Overhead account is used to accumulate:

Huxtable Manufacturing Corporation charges manufacturing overhead to its products by using a predetermined overhead rate, computed on the basis of machine hours. The following data pertain to the current year: Budgeted manufacturing overhead: $480,000 Actual manufacturing overhead: $440,000 Budgeted machine hours: 20,000 Actual machine hours: 16,000 Overhead applied to production totalled.

Richmond Corporation, located outside Vancouver, uses a predetermined overhead rate of $20 per machine hour. In deriving this figure, the company's accountant used:

Spencerville Incorporated applies manufacturing overhead at the rate of $60 per machine hour. Budgeted machine hours for the current period were anticipated to be 80,000; However, a lengthy strike resulted in actual machine hours being worked of only 65,000. Budgeted and actual manufacturing overhead figures for the year were $4,800,000 and $4,180,000, respectively. On the basis of this information, the company's year-end overhead was:

Quinn Consulting Limited provides consulting services and uses a job-order system to accumulate the cost of client projects. Traceable costs are charged directly to individual clients; in contrast, other costs incurred by Quinn, but not identifiable with specific clients, are charged to jobs by using a predetermined overhead application rate. Clients are billed for directly chargeable costs, overhead, and a markup. Quinn anticipates the following costs for the upcoming year: Percentage of Cost Directly Attributable Professional staff salaries \ 5,000,000 \ 80\% Administrative support staff 600,000 50\% Travel 200,000 80\% Other operating costs 20\% Total Quinn's partners desire to make a $580,000 profit for the firm and plan to add a percentage markup on total cost to achieve that figure. On June 30^th, Quinn completed work on a project for Findley Manufacturing. The following costs were incurred: professional staff salaries, $70,000; administrative support staff, $10,000; travel, $11,000; and other operating costs, $2,000. Required: A. Determine Quinn's total traceable costs for the upcoming year and the firm's total anticipated overhead. B. Calculate the predetermined overhead rate. The rate is based on total costs traceable to client jobs. C. What percentage of total cost will Quinn add to each job to achieve its profit target? D. Determine the total cost of the Findley Manufacturing project. How much would be billed to Findley for services performed?

A review of Juicy Corporation's Work-in-Process Inventory account found a debit for materials of $67,000. If all procedures were performed in the correct manner, this means that the firm:

Montgomery, Inc., which uses a job-costing system, is a labour-intensive firm, with many skilled craftspeople on the payroll. Job no. 789 was the only job in process on January 1, having costs of $22,500 as of that date. Direct materials used and direct labour incurred during January were: Job No. Direct Materials Direct Labour 789 \ 2,000 \ 6,000 790 9,000 10,000 791 14,000 8,000 Job no. 791 was the only job in production as of January 31. Required: A. Should Montgomery use direct labour or machine hours as a cost driver. Why? B. Assume that the company decided to use direct labour as its cost driver. If the budgeted amounts of direct labour and manufacturing overhead are anticipated to be $200,000 and $300,000, respectively, what is the firm's predetermined overhead rate? C. Compute the cost of work-in-process inventory as of January 31. D. Compute the cost of jobs completed during January. E. Suppose that the company sold all of its completed jobs, adding a 40% markup to cost. How much would the firm report as sales revenue?

Which of the following manufacturers would most likely use job-order costing?

Discuss the reasons for using applied overhead rather than actual overhead to determine the cost of production jobs.

More Manufacturing Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. Last year, More worked 87,000 actual direct labour hours and incurred $300,000 of actual manufacturing overhead cost. More had initially estimated that it would work 85,000 direct labour hours during the year and incur $340,000 of manufacturing overhead cost. Based on the information provided, More's manufacturing overhead cost for the year was:

Grumpy's Manufacturing recently sold goods that cost $30,000 for $40,000 cash. The journal entries to record this transaction would include:

The assignment of direct labour cost to individual jobs is based on:

Dodge Products uses a job-costing system for its units, which pass from the Machining Department, to the Assembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, the Assembly Department performs a number of manual-assembly activities. The following information relates to the Machining Department for the year just ended: Budgeted manufacturing overhead \ 12,000,000 Actual manufacturing overhead 12,142,000 Budgeted machine hours 800,000 Actual machine hours 794,000 The Machining Department data that follow pertain to Job No. 775, the only job in production at year-end. Direct material used Direct labour Machine hours \ 125,000 61,800 550 Required: A. Assuming the use of normal costing, calculate the predetermined overhead rate that is used in the Machining Department. B. Compute the cost of the Machining Department's year-end work-in-process inventory. C. Determine whether overhead was under- or overapplied during the year in the Machining Department. D. If Dodge disposes of the Machining Department's under- or overapplied overhead as an adjustment to Cost of Goods Sold, would the company's Cost-of-Goods-Sold account increase or decrease? Explain. E. How much overhead would have been charged to the Machining Department's Work-in-Process account during the year? F. Comment on the appropriateness of direct labour cost as a cost driver to apply manufacturing overhead in the Assembly Department.

If the amount of effort and attention to products varies substantially throughout a company's various manufacturing operations, the company might consider the use of:

Which of the following types of companies would most likely use job order costing rather than process costing?

The selected data that follow relate to the Berger Furniture Company. Direct material purchased on account \ 160,000 Direct material used 79,000 Direct labour 170,000 Manufacturing overhead incurred 100,000 Manufacturing overhead applied 90,000 During the year, products costing $310,000 were completed, and products costing $316,000 were sold for $455,000. Required: Prepare journal entries to record the preceding transactions and events.

Cheetah Manufacturing Company incurred $300,000 of direct labour and $10,000 of indirect labour. The proper journal entry to record these events would include a debit to Work in Process for: