Exam 3: Product Costing and Cost Accumulation in a Batch Production Environment

Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor hours. Overhead was estimated to be $150,000, direct professional labor hours were estimated to be 15,000, and direct professional labor cost was projected to be $225,000. During the year, Media incurred actual overhead costs of $146,000, actual direct professional labor hours of 14,500, and actual direct labor cost of $222,000. By year-end, the firm's overhead was:

The selected data that follow relate to the Bargeron Furniture Company. Direct material purchased on account \ 160,000 Direct material used 79,000 Direct labor 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 on account for $455,000. Required: Prepare journal entries to record the preceding transactions and events.

Dancer Corporation, which uses a job-costing system, had two jobs in process at the start of 20x1: job no. 59 ($95,000) and job no. 60 ($39,500). The following information is available: • The company applies manufacturing overhead on the basis of machine hours. Budgeted overhead and machine activity for the year were anticipated to be $720,000 and 20,000 hours, respectively. • The company worked on three jobs during the first quarter. Direct materials used, direct labor incurred, and machine hours consumed were: • Manufacturing overhead during the first quarter included charges for depreciation ($20,000), indirect labor ($50,000), indirect materials used ($4,000), and other factory costs ($108,700). • Dancer completed job no. 59 and job no. 60. Job no. 59 was sold for cash, producing a gross profit of $24,600 for the firm. Required: A. Determine the company's predetermined overhead application rate. B. Prepare journal entries as of March 31 to record the following. (Note: Use summary entries where appropriate by combining individual job data.) 1. The issuance of direct material to production, and the direct labor incurred. 2. The manufacturing overhead incurred during the quarter. 3. The application of manufacturing overhead to production. 4. The completion of job no. 59 and no. 60. 5. The sale of job no. 59.

Pruitt Company has developed an integrated system that coordinates the flow of all goods, services, and information into and out of the organization, working with raw material vendors as well as customers to improve service and reduce costs. The firm is said to be using:

Which of the following statements regarding work in process is not correct?

The final step in recognizing the completion of production requires a company to debit Finished-Goods Inventory and credit Work-in-Process Inventory.

The estimates used to calculate the predetermined overhead rate will virtually always:

Job no. C12 was completed in November at a cost of $28,500, subdivided as follows: direct material, $13,500; direct labor, $6,000; and manufacturing overhead, $9,000. The journal entry to record the completion of the job is:

The process of assigning overhead costs to the jobs that are worked on is commonly called:

Which of the following statements about materials is false?

Quatro Products started and finished job no. C19 during June. The job required $15,000 of direct material and 75 hours of direct labor at $12 per hour. The predetermined overhead rate is $16 per direct labor hour. During June, direct materials requisitions for all jobs totaled $149,000; the total direct labor hours and cost were 6,200 hours at $12 per hour; and the total cost of jobs completed was $337,500. All of these figures include data that pertain to job no. C19. Required: A. Prepare journal entries that summarize June's total activity. B. Determine the cost of job no. C19.

The following information relates to October: Production supervisor's salary: $3,500 Factory maintenance wages: 250 hours at $10 per hour The journal entry to record the preceding information is:

The term "normal costing" refers to the use of:

Athena Corporation uses a job-cost system and applies manufacturing overhead to products on the basis of machine hours. The company's accountant estimated that overhead and machine hours would total $800,000 and 50,000, respectively, for 20x1. Actual costs incurred follow. Direct material used \ 250,000 Direct labor 300,000 Manufacturing overhead 816,000 The manufacturing overhead figure presented above excludes $27,000 of sales commissions incurred by the firm. An examination of job-cost records revealed that 18 jobs were sold during the year at a total cost of $2,960,000. These goods were sold to customers for $3,720,000. Actual machine hours worked totaled 51,500, and Athens adjusts under- or overapplied overhead at year-end to Cost of Goods Sold. Required: A. Determine the company's predetermined overhead application rate. B. Determine the amount of under- or overapplied overhead at year-end. Be sure to indicate whether overhead was under- or overapplied. C. Compute the company's adjusted cost of goods sold. D. What alternative accounting treatment could the company have used at year-end to adjust for under- or overapplied overhead? Is the alternative that you suggested appropriate in this case? Why?

Strong Company applies overhead based on machine hours. At the beginning of 20x1, the company estimated that manufacturing overhead would be $500,000, and machine hours would total 20,000. By 20x1 year-end, actual overhead totaled $525,000, and actual machine hours were 25,000. On the basis of this information, the 20x1 predetermined overhead rate was:

Taffy Corporation sells a number of products to groups that provide educational workshops and seminars. One of the products involves a combination leather case and note pad. The company purchases the case and pad combination from a supplier and encloses a $3 pen that contains the educational groups' name and logo. Taffy began to carry this product at the start of 20x3, acquiring 12,500 cases from Executive Supply for $87,500 along with an identical number of pens from Accent Goods. During 20x3, 9,500 of the cases and pens were issued to Taffy's assembly operation where the pen is added. Eighty percent of these cases were completed as of December 31, and a review of the December 31 finished-goods inventory found 2,600 completed cases in the warehouse. Conversations with salespeople revealed that 70 finished sets were used in various company marketing activities throughout the year. Required: A. Determine the cost of the cases and pens that would appear in Taffy's raw materials, work in process, and finished-goods inventory as of December 31. B. Determine the cost of the cases and pens that would appear in the company's cost of goods sold for 20x3.

The left side of the Manufacturing Overhead account is used to accumulate:

Which of the following would not likely be used by service providers to accumulate job costs?

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

Simone uses a predetermined overhead application rate of $8 per direct labor hour. A review of the company's accounting records for the year just ended discovered the following: Underapplied manufacturing overhead: $7,200 Actual manufacturing overhead: $392,000 Budgeted labor hours: 50,000 Simone's actual labor hours worked totaled: