Handouts for chapter 3 - job order costing



Job Order Costing Practice Problem 1

Davis Manufacturing, Inc.

1994 Manufacturing Overhead Budget

Insurance 42,000

Indirect Labor 100,000

Indirect Material 75,000

Factory Rent 120,000

Equipment Rent 50,000

Utilities 60,000

TOTAL 447,000

Budgeted number of DLH: 20,000

Budgeted machine hours: 60,000

If overhead is applied based on direct labor hours, what is the predetermined overhead rate for 1994?

If overhead is applied based on machine hours, what is the predetermined overhead rate for 1994?

If we pay our workers $9/hour and overhead is applied based on direct labor dollars, what is the predetermined overhead rate for 1994?

Assume that Davis Manufacturing applies overhead based on direct labor hours. Job 1356 yielded 1500 units and was completed in 200 direct labor hours. Direct material costs for the job totals $10,575. Calculate the unit cost for Job 1356.

Job Order Costing Practice Problem 2

The following data has been collected for Department 203 for 1993.

Work in process as of 1/1/93:

Job No. Material Labor Overhead Total

1376 $ 17,500 $ 22,000 $ 33,000 $ 72,500

Actual costs incurred by Department 203 during 1993:

By Job:

1376 $ 1,000 $ 7,000 $ 8,000

1377 26,000 53,000 79,000

1378 12,000 9,000 21,000

1379 4,000 1,000 5,000

TOTAL $ 43,000 $ 70,000

Not incurred by job:

Indirect Materials $ 15,000

Indirect Labor 53,000

Employee Benefits 23,000

Depreciation 12,000

Supervision 20,000

TOTAL $123,000

Department 203 Overhead Budget for 1993:

Indirect Materials $ 16,000

Indirect Labor 56,000

Employee Benefits 24,000

Supervision 20,000

Depreciation 12,000

TOTAL $128,000

Budgeted Direct Labor Dollars $ 80,000

Balances at 12/31/93, before disposition of over/under applied overhead:

Finished Goods Inventory $106,000

Cost of Goods Sold 852,000

Overhead is applied based on direct labor dollars.

Use this information to complete the questions on the following page.

1. What is the predetermined overhead rate for 1993 for Department 203?

2. Apply overhead to each of the jobs worked on in 1993.

3. Jobs 1376 and 1377 were completed during 1993. The jobs yielded 5,000 and 3,000 units of product, respectively. What was the unit cost for each of these products?

4. What is the value of work in process inventory on 12/31/93? What jobs are included?

5. Was overhead over- or underapplied for 1993 in Department 203? By how much?

Job Order Costing Practice Problem 3

At the beginning of the current year, Maple Products had the following inventory amounts on its balance sheet:

Raw materials $12,000

Work in process 20,000

Finished goods 35,000

Maple Products estimated that it would incur $60,000 in manufacturing overhead during the year, and that it would operate at a level of 15,000 direct labor hours. During the current year, the following transactions were completed:

A. Purchased raw material on account, $8,000.

B. Raw materials were issued to production, $16,000. 90% of these materials were direct, and 10% were indirect.

C. Factory payrolls were paid, $49,000. 80% of the factory payroll was direct labor, and 20% was indirect labor. 14,000 direct labor hours were worked.

D. Administrative payrolls were paid, $12,00. Sales payrolls were paid, $10,000.

E. Depreciation on factory equipment, $8,000.

F. Factory utilities paid, $7,000.

G. Various administrative expenses incurred and paid, $20,000

H. Various selling expenses incurred and paid, $15,000.

I. Various manufacturing overhead costs incurred and paid (other than those indicated above), $30,000.

J. Manufacturing overhead was applied to production.

K. Completed production for the current year, $106,600.

L. Sales to customers for the current year were:

Selling price $160,000

Cost ?

(Ending finished goods inventory, $21,600)

Required:

1. Prepare T-accounts for Raw Materials, FOH, Work in Process, Finished Goods, and Cost of Goods Sold. Post the appropriate parts of your journal entries to these T-accounts to determine the ending balance in each account. (Don't forget to enter the opening balances in the inventory accounts.)

Job Order Costing Practice Problem 4

Estimated cost and operating data for the forthcoming period for three companies are given below:

Company A Company B Company C

Direct labor hours 12,000 15,000 20,000

Manufacturing overhead $90,000 $120,000 $150,000

Machine hours 20,000 20,000 25,000

Direct labor cost $60,000 $ 75,000 $100,000

Predetermined OH Direct Labor Direct Labor Machine

rates are based on hours cost hours

Required:

1. Compute the predetermined overhead rate to be used in the forthcoming period for each company.

2. Assume for Company B that $80,000 of direct labor cost actually is incurred. How much overhead will be applied to work in process?

3. Assume for Company C that 30,000 machine hours are actually worked during the forthcoming period. How much overhead will be applied to work in process? If actual overhead costs total $175,000 will overhead be over- or under-applied? By how much?

Job Order Costing Practice Problem 5

The Carter Company began operations on January 2, 19x5. The following activity took place in the work in process account for the month of January:

|Work in |Progress |

|Direct materials 10,000 |To finished goods 79,000 |

|Direct labor 30,000 | |

|Manufacturing OH 45,000 | |

| | |

The Carter Company uses a job order costing system, and applies manufacturing overhead to work in process on a basis of direct labor cost. At the end of January, only one job was still in process. This job (Job 15) has been charged with $2,000 in direct materials cost.

Required:

Complete the following job cost sheet for partially completed Job 15:

Job Cost Sheet-Job 15 (as of January 31, 19x5)

Direct materials $

Direct labor $

Manufacturing overhead $

Total cost to January 31 $

Job Order Costing Practice Problem 6

Selected ledger accounts of the Barnaby Company are given below for the year 19x8:

|Raw materials |inventory | |Manufacturing |overhead |

|Jan 1 15,000 |19x8 credits ? | |19x8 debits 74,000 |19x8 credits ? |

|19x8 debits 50,000 | | | | |

|Dec 31 12,000 | | | | |

| | | | | |

| | | | | |

|Work in |Process | |Factory wages |payable |

|Jan 1 35,000 |19x8 credits | |19x8 debits 67,000 |Jan 1 4,000 |

|DM 48,000 | 188,000 | | |19x8 credits 66,000 |

|DL 60,000 | | | | |

|OH 75,000 | | | | |

|Dec 31 ? | | | | |

| | | | | |

| | | | | |

|Finished |Goods | |Cost of |Goods Sold |

|Jan 1 60,000 |19x8 credits ? | |19x8 debits ? | |

|19x8 debits ? | | | | |

|Dec 31 48,000 | | | | |

| | | | | |

| | | | | |

Required:

1. What was the actual manufacturing overhead cost incurred during 19x8?

2. How much of the actual manufacturing overhead in part (1) consisted of indirect materials?

3. How much of the actual manufacturing overhead in part (1) consisted of indirect labor?

4. What was the cost of goods manufactured for 19x8?

5. What was the cost of goods sold for 19x8?

6. If overhead is applied to production on a basis of direct labor cost, what rate was in effect for 19x8?

7. Was manufacturing overhead over- or under-applied for 19x8? By how much?

Job Order Costing Practice Problem 7

Alex Company uses a job order cost system. The company uses predetermined overhead rates, based on direct labor hours, in applying manufacturing overhead to jobs. Estimated cost and operating data for 1994 are given below:

Estimated direct labor hours 30,000

Estimated direct labor cost $ 90,000

Estimated manufacturing overhead $ 120,000

At the end of 1994, Alex Company’s cost records revealed the following actual cost and operating data:

Direct labor hours 32,000

Direct labor cost $ 68,000

Manufacturing overhead $ 130,000

Raw materials inventory $ 8,000

Work in process inventory $ 25,000

Finished goods inventory $ 50,000

Cost of goods sold $ 175,000

REQUIRED

1. Compute Alex Company’s predetermined overhead rate for 1994.

2. Compute the underapplied or overapplied manufacturing overhead for 1994.

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