Exam 5: Systems Design: Job-Order Costing

Sai Company uses a job order cost system and applies manufacturing overhead costs to jobs using a predetermined overhead rate based on direct labour-hours. The following data were extracted from the company's accounting records for Year 6 Estimated Actual Manufacturing overhead costs \ 50,000 \ 54,000 Direct labour hours 20,000 hours 24,000 hours Job \#461 was completed during the year and the following costs had been incurred on that job: Direct materials: \ 4,000 Direct labour: \ 1,500 (at \ 5.00 per direct labour hour) -How much of any underapplied or overapplied overhead would have been due to the fact that the estimated overhead costs were different from the actual?

The most common accounting treatment of underapplied manufacturing overhead is to transfer it to the Manufacturing Overhead control account.

The following data are for Potras Company: Beginning Ending Finished goods inventory \ 30,000 \ 40,000 Work-in-process inventory 20,000 13,000 Raw materials inventory 21,000 26,000 Purchases of raw materials 71,000 Factory depreciation 5,000 Other factory costs 10,000 Direct labour 27,000 Indirect labour 6,000 Selling expense 12,000 Over- or underapplied overhead -0 -What is the cost of goods manufactured?

Carlo Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs.The company estimated manufacturing overhead at $255,000 for the year and direct labour hours at 100,000 hours.Actual manufacturing overhead costs incurred during the year totalled $270,000; actual direct labour hours were 105,000.What was the overapplied or underapplied overhead for the year?

The following partially completed T-accounts summarize last year's transactions for Kelshaw Company:At the end of the year, the company closes out the balance in the Manufacturing Overhead account to Cost of Goods Sold. -What is the cost of goods sold (after adjustment for under- or over applied overhead)?

At the beginning of the current year CR Company estimated the following costs: Direct materials \ 4,000 Direct labour 20,000 Rent on factory building 15,000 Sales salaries 25,000 Depreciation on factory equipment 8,000 Indirect labour 10,000 Production supervisor's salary 12,000 CR Company estimated 20,000 labour hours to be worked during the year.Actual labour hours worked were 22,000 hours.If overhead is applied on the basis of direct labour hours,what will be the overhead applied for the year?

Gilford,Inc.,uses a job-order costing system.Costs going through the company's work-in-process account during June are listed below.Manufacturing overhead is applied to production using a predetermined overhead rate based on direct labour cost. Work in process Balance 0 \ 95,000 transferred out Direct materials \ 20,000 Direct labour 30,000 Manufacturing overhead 60,000 Balance \ 15,000

The information below has been taken from the cost records of Tercel Company for the past year: Raw materials used in production (all direct) \ 326,000 Total manufacturing costs charged to jobs during the year (includes raw materials, direct labour, and manufacturing overhead applied at the rate of 60\% of direct labour cost) \ 686,000 Cost of goods available for sales \ 826,000 Selling and administrative expenses \2 5,000 Inventories Beginning Ending Raw materials (all direct) \ 75,000 \ 85,000 Work in process 80,000 30,000 Finished goods 90,000 110,000 -What amount of direct labour cost was charged to production during the year?

The Bus Company uses a job-order costing system. The following information was recorded for September: Added During September Job Number September 1 Inventory Direct Materials Direct Labour 1 \ 1,000 \ 300 \ 200 2 1,400 250 300 3 500 1,500 150 4 750 4,000 400 The direct labour wage rate is $10 per hour. Overhead is applied at the rate of $5 per direct labour hour. Jobs 1, 2, and 3 have been completed and transferred to finished goods. Job 2 has been delivered to the customer. -What is the cost of goods manufactured for September?

Allenton Company is a manufacturing firm that uses job-order costing.At the beginning of the year,the company's inventory balances were as follows: Raw materials: $26,000 Work in process: $47,000 Finished goods: $133,000 The company applies overhead to jobs using a predetermined overhead rate based on machine hours.At the beginning of the year,the company estimated that it would work 31,000 machine hours and incur $248,000 in manufacturing overhead cost.The following transactions were recorded for the year: a.)Raw materials purchased: $411,000. b.)Raw materials requisitioned for use in production: $409,000 ($388,000 direct and $21,000 indirect). c.)The following employee costs were incurred: Direct labour: $145,000 Indirect labour: $61,000 Administrative salaries: $190,000 d.)Selling costs: $148,000. e.)Factory utility costs: $12,000. f.)Depreciation for the year: $121,000,of which $114,000 is related to factory operations and $7,000 is related to selling and administrative activities. g.)Manufacturing overhead was applied to jobs.The actual level of activity for the year was 29,000 machine hours. h.)Cost of goods manufactured for the year: $783,000. i.)Sales for the year: $1,107,000; the costs on the job cost sheets of the goods that were sold: $768,000. j.)The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold. Required: Prepare the appropriate journal entry for each of the items above (a.through j.).You can assume that all transactions with employees,customers,and suppliers were conducted in cash.

Which of the following companies is most likely to use a job-order costing system rather than a process costing system?

The following partially completed T-accounts summarize last year's transactions for Kelshaw Company:At the end of the year, the company closes out the balance in the Manufacturing Overhead account to Cost of Goods Sold. -What would be the ending Work in Process account balance?

(Appendix 5A)If the predetermined overhead rate is based on the estimated total amount of the allocation base at capacity,it is more likely that overhead will be underapplied than overapplied.

Kanuck Company applies overhead to completed jobs on the basis of $0.70 per machine hour.If Job 501 shows $28,000 of manufacturing overhead applied,how many machine hours were used for the job?

In order to improve the accuracy of unit costs,most companies recalculate the predetermined overhead rate each month.

Sweet Company applies overhead to jobs on the basis of 125% of direct labour cost.If Job 107 shows $10,000 of manufacturing overhead applied,how much was the direct labour cost on the job?

The Bus Company uses a job-order costing system. The following information was recorded for September: Added During September Job Number September 1 Inventory Direct Materials Direct Labour 1 \ 1,000 \ 300 \ 200 2 1,400 250 300 3 500 1,500 150 4 750 4,000 400 The direct labour wage rate is $10 per hour. Overhead is applied at the rate of $5 per direct labour hour. Jobs 1, 2, and 3 have been completed and transferred to finished goods. Job 2 has been delivered to the customer. -What is the cost of goods sold for September (before disposition of any under- or overapplied overhead)?

Sharp Company's records show that overhead was overapplied by $10,000 last year.This overapplied overhead was closed out to the Cost of Goods Sold account at the end of the year.In trying to determine why overhead was overapplied by such a large amount,the company has discovered that $6,000 of depreciation on factory equipment was charged to administrative expense in error.Given the above information,which of the following statements is true?

The materials requisition form is a document that specifies the type and quantity of materials to be drawn from the storeroom and identifies the job to which the costs of the materials are to be charged

A public accounting firm employs 10 full-time professionals who provide services to clients.All professional labour compensation is traced directly to clients on a per professional labour-hour basis.Any other costs are included in a single indirect-cost pool (same as overhead)and allocated to individual clients according to billable professional labour-hours. Operating costs and data for the year included the following: Estimated Actual Overhead (indirect) costs \ 1,000,000 \ 1,200,000 Number of billable professional labour-hours 40,000 50,000 Total professional compensation 750,000 750,000 Required: a.By how much,if any,was the overhead cost underapplied or overapplied? b.Prepare a summary journal entry to close any underapplied or overapplied overhead cost to a Cost of Services Provided account. c.Explain qualitatively and quantitatively (in as much detail as possible)the source(s)of any underapplied or overapplied overhead cost.