Exam 2: Job Order Costing and Analysis

MOB Corp. applies overhead on the basis of direct labor costs. Its bookkeeper accidentally deleted most of the journal entries that had been recorded for January. A printout of the general ledger (in T-account form) showed the following: A review of the prior year's financial statements, the current year's budget, and January's source documents produced the following information: (1) Accounts Payable is used for raw material purchases only. January purchases were $49,000. (2) Factory overhead costs for January were $17,000 none of which is indirect materials. (3) The January 1 balance for finished goods inventory was $10,000. (4) There was a single job in process at January 31 with a cost of $2,000 for direct materials and $1,500 for direct labor. (5) Total cost of goods manufactured for January was $90,000. (6) All direct laborers earn the same rate ($13/hour). During January, 2,500 direct labor hours were worked. (7) The predetermined overhead rate is based on direct labor costs. Budgeted (expected) overhead for the year is $195,000 and budgeted (expected) direct labor is $390,000. Fill in the missing amounts a) through o) above in the T-accounts above.

A company's predetermined overhead rate is applied at 150% of direct materials cost. How much overhead would be allocated to a job that used total direct materials costs was $40,000?

Job cost sheets include both product and period costs.

A company's overhead rate is 200% of direct labor cost. Using the following incomplete accounts, determine the cost of direct materials used.

A job order costing system would best fit the needs of a company that makes:

If overhead is underapplied, it means that individual jobs have not been charged enough during the year and the cost of goods sold reported is too low.

Job order production is also known as:

Minstrel Manufacturing uses a job order costing system. During one month, Minstrel purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, of which $40,000 was indirect labor. Minstrel uses a predetermined overhead rate of 150% of direct labor cost. The journal entry to record the issuance of materials to production is:

A job order production system would be appropriate for a company that produces which one of the following items?

Nutley Company uses a job order cost system and last period incurred $70,000 of overhead and $100,000 of direct labor. Nutley estimates that its overhead next period will be $65,000. The company also expects to incur $100,000 of direct labor. If Nutley bases its overhead applied on direct labor cost, what should be the predetermined overhead rate for the next period?

Both direct and indirect labor costs are recorded on individual job cost sheets.

Adams Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Adams estimated total overhead of $396,000; materials of $410,000 and direct labor of $220,000. During the year Adams incurred $418,000 in materials costs, $413,200 in overhead costs and $224,000 in direct labor costs. Compute the amount of overhead applied to jobs during the year.

A job cost sheet shows information about each of the following items except:

The total cost on job cost sheets for all jobs in process equals the amount in the ________ Inventory account.

There are two basic types of cost accounting systems: job order costing and process costing.

The journal entry to record indirect materials used includes a debit to Work in Process Inventory.

A type of production that yields customized products or services for each customer is called:

Underapplied overhead is the amount by which overhead applied to jobs exceeds the actual overhead incurred during a period.

The journal entry to record the purchase of materials includes a debit to Work in Process Inventory.

Chumley Advertising Agency contracted with a company to prepare an ad campaign. Chumley uses a job order costing system. Chumley estimates that the job will take 140 designer hours at $90 per hour and 85 staff hours at $45 per hour. Chumley uses two overhead rates in applying overhead to jobs: Designer-related at $100 per designer hour and staff-related at $50 per staff hour. Determine the total estimated cost for this job.