ch7 Student: ___________________________________________________________________________
1.
A job is a product product or service service that that can be easily easily and convenient conveniently ly distinguis distinguished hed from other other products/ products/servi services. ces. True
2.
Job cost sheets are are used in accounti accounting ng systems systems as a subsidi subsidiary ary ledger ledger for the the Work-in-Pr Work-in-Process ocess account. account. True
3.
False
The journal journal entry entry to record record actual actual manufact manufacturing uring overhead overhead for indirect indirect labor debits debits Manufacturi Manufacturing ng Overhead (Control) and credits Work-in-Process inventory. True
9.
False
The journal journal entry entry to record record actual actual manufact manufacturing uring overhead overhead for indirect indirect material material debits debits Manufact Manufacturing uring Overhead (Control) and credits Accounts Payable. True
8.
False
Indirect Indirect materia materiall and indirec indirectt labor labor are two examples examples of manufactu manufacturing ring overhead overhead costs. costs. True
7.
False
Accounting Accounting for direct direct materi materials als and direct direct labor labor is easier easier than than accounting accounting for manufactu manufacturing ring overhead overhead costs. costs. True
6.
False
The cost in in the ending ending Finished Finished Goods inventor inventory y account consis consists ts of the direct direct materia materials, ls, direct direct labor, labor, and manufacturing overhead of all jobs still in process at the end of the period. True
5.
False
Job shops shops have three three types of of inventory inventory accounts: accounts: Finished Finished Goods, Goods, Work-i Work-in-Proc n-Process, ess, and Direct Direct Materi Materials. als. True
4.
False
False
The periodic periodic allocati allocation on of manufact manufacturing uring overhead overhead costs to job cost cost sheets sheets is based on an event, event, not a transaction. True
False
10. The predetermine predetermined d overhead rate is computed computed by dividing dividing the estimated estimated activity activity of the allocation allocation base into the estimated manufacturing overhead costs. True
False
11. The journal entry entry to apply manufacturin manufacturing g overhead costs costs to completed jobs jobs credits either either Applied Applied Manufacturing Overhead or Manufacturing Overhead (Control). True
False
12. At the end of the accounting accounting period, manufactur manufacturing ing overhead overhead costs are applied applied to uncompleted uncompleted jobs using the same predetermined overhead rate that is used to apply manufacturing overhead costs to completed jobs. True
False
13. Overapplied Overapplied overhead overhead occurs when the actual actual overhead overhead costs incurred incurred during a period period are greater than the overhead costs applied during the period. True
False
14. Underapplied Underapplied overhead overhead occurs when when the actual overhead overhead costs incurred incurred during during a period are greater than the overhead costs applied during the period. True
False
15. Normal costing uses the actual allocation base base activity to apply manufacturing manufacturing overhead costs to jobs during the period. True
False
16. Actual costing costing does not use a predetermin predetermined ed overhead rate to apply apply manufacturing manufacturing overhead overhead costs to jobs completed during the period. True
False
17. Service Service organizations, organizations, by their nature, nature, cannot have have a balance in Work-inWork-in-Proces Processs Inventory. Inventory. True
False
18. Service Service organizations organizations generally generally use the same job costing procedures procedures as manufacturers. manufacturers. True
False
19. It is unethical unethical to to intentionall intentionally y charge costs costs to the wrong wrong job. True
False
20. One difference difference between between jobs and projects projects is the account titles titles used in the costing costing process. process. True
False
21. Which of the following following statement statementss is (are) true regarding regarding product product costing? costing? (A) A job is a cost object that can be easily and conveniently distinguished from other cost objects. (B) Job cost sheets are used in accounting acc ounting systems as a subsidiary ledger for the Work-in-Process account. A. Only A is true. B. Only B is true. C. Both A and B are true. D. Neither A nor B is true.
22. For which of the following following businesse businessess would the job order cost system system be appropriate appropriate?? A. Auto repair shop B. Crude oil refinery C. Drug manufacturer D. Root beer producer 23. Which of the following is not a characteristic of job costing? A. B. C. D.
Each job is distinguishable from from other jobs. Identical units are produced on an ongoing basis. basis. Job cost data are used for setting prices and bids. It is not possible to compare actual costs with estimated costs. costs.
24. Which of the the following following companies companies would most most likely use use job costing? costing? A. Paper manufacturer B. Paint producer C. Breakfast cereal maker D. Advertising agency 25. The journal journal entry to record record the completion completion of a job in a job order order cost system system is
A. a B. b C. c D. d E. e 26. The journal entry to record requisitions requisitions of material material for new jobs started during the period is is
A. a B. b C. c D. d E. e
27. Which of the following documents is used as the basis for posting to the direct materials section of the job cost sheet? A. Purchase requisition. B. Materials requisition. C. Receiving report. D. Purchase order. E. Time card. 28. Which of the following documents is used as the basis for posting to the direct labor section of the job cost sheet? A. Purchase requisition. B. Materials requisition. C. Receiving report. D. Purchase order. E. Time card. 29. Which of the following accounts is used to accumulate the actual manufacturing overhead costs incurred during a period? A. Applied Manufacturing Overhead B. Work-in-Process Inventory C. Manufacturing Overhead Control D. Cost of Goods Sold E. Finished Goods Inventory 30. The journal entry to record the actual manufacturing overhead costs for indirect material is
A. a B. b C. c D. d E. e 31. What are the transfers-out from the Finished Goods Inventory called? A. Cost of Goods Manufactured B. Cost of Goods Available C. Cost of Goods Completed D. Cost of Goods Sold
32. In a job costing system, the dollar amount in the journal entry that transfers the costs of jobs from Work-inProcess Inventory to Finished Goods Inventory is the sum of the costs charged to all jobs A. sold during the period. B. completed during the period. C. in process during the period. D. started in process during the period. E. completed and sold during the period. 33. Which of the following events or transactions will not result in manufacturing overhead being applied to production? A. B. C. D.
Completion of a job in the current period that was started in a prior period Completion of a job in the current period that was started in the current period Preparing financial statements when work is in process at the end of the period Preparing financial statements when there is no work in process at the end of the period
34. The journal entry to record the completion of a job in a job costing system is
A. a B. b C. c D. d E. e 35. It is possible that the total cost of a job started in April and completed in May will not include: A. direct material added in April. B. direct labor added in May. C. applied overhead in April. D. applied overhead in May. E. direct material purchased in May. 36. Underapplied overhead occurs when the balance in the Manufacturing Overhead Control account is: A. B. C. D.
greater than the balance in the Applied Manufacturing Overhead account. equal to the balance in the Applied Manufacturing Overhead account. less than the balance in the Applied Manufacturing Overhead account. less than the balance in the Finished Goods Inventory account.
37. Which of the following statements is (are) true regarding the application of manufacturing overhead? (A) Manufacturing overhead is only recorded on the job cost sheets when (a) financial statements are prepared or a job is completed. (B) Overapplied overhead occurs when the actual overhead costs incurred during a period are greater than the overhead costs applied during the period. A. Only A is true. B. Only B is true. C. Both A and B are true. D. Neither A nor B is true. 38. The journal entry to write-off an insignificant underapplied overhead balance at the end of an accounting period is
A. B. C. D.
a b c d
39. The journal entry to write-off a significant underapplied overhead balance at the end of an accounting period is
A. B. C. D.
a b c d
40. If a company multiplies its predetermined overhead rate by the actual activity level of its allocation base, it is using A. standard costing. B. normal costing. C. actual costing. D. budget costing. E. ideal costing. 41. If a company multiplies its actual overhead rate by the actual activity level of its allocation base, it is using A. standard costing. B. normal costing. C. actual costing. D. budget costing. E. ideal costing. 42. One of the primary differences between job costing for service and manufacturing companies is service firms generally A. use fewer direct materials. B. have less direct labor. C. do not use predetermined overhead rates. D. have no Work in Process Inventory. 43. Which of the following is not a difference between job costing for service firms and job costing for manufacturing companies? A. B. C. D.
Service firms generally use fewer direct materials that manufacturing companies. Service firms' overhead accounts have slightly different titles (e.g., Applied Service Overhead). Service firms' finished jobs are charged to Cost of Services Billed instead of Cost of Goods Sold. Service firms' costs are immediately expensed since all work is completed during a period.
44. The journal entry to record the completion of a contract in a job costing system for a service firm is
A. a B. b C. c D. d E. e
45. The journal entry to write-off an insignificant overapplied overhead balance at the end of an accounting period for a service firm is
A. B. C. D.
a b c d
46. Complex jobs that take multiple time periods and require the work of many different departments, divisions, or subcontractors are called A. clients. B. projects. C. customers. D. contracts. E. vendors. 47. Manufacturing overhead applied on the basis of direct labor hours was $120,000, while actual manufacturing overhead incurred was $124,000 for the month of April. Which of the following is always true given the statement above? A. Overhead was overapplied by $4,000. B. Overhead was underapplied by $4,000. C. Actual direct labor hours exceeded budgeted direct labor hours. D. Actual direct labor hours were less than budgeted direct labor hours. 48. The predetermined overhead rate for manufacturing overhead for 2008 is $4.00 per direct labor hour. Employees are expected to earn $5.00 per hour and the company is planning on paying its employees $100,000 during the year. However, only 75% of the employees are classified as "direct labor." What was the estimated manufacturing overhead for 2008? A. B. C. D.
$60,000 $75,000 $80,000 $93,750
49. Before prorating the manufacturing overhead costs at the end of 2008, the Cost of Goods Sold and Finished Goods Inventory had applied overhead costs of $57,500 and $20,000 in them, respectively. There was no Work-in-Process at the beginning or end of 2008. During the year, manufacturing overhead costs of $74,000 were actually incurred. The balance in the Applied Manufacturing Overhead was $77,500 at the end of 2008. If the under or overapplied overhead is prorated between Cost of Goods Sold and the inventory accounts, how much will be allocated to the Finished Goods Inventory? A. B. C. D.
$903 $1,217 $1,283 $2,597
50. Before prorating the manufacturing overhead costs at the end of 2008, the Cost of Goods Sold and Finished Goods Inventory had applied overhead costs of $57,500 and $20,000 in them, respectively. There was no work in process at the beginning or end of 2008. During the year, manufacturing overhead costs of $74,000 were actually incurred. The balance in the Applied Manufacturing Overhead was $77,500 at the end of 2008. If the under- or overapplied overhead is prorated between Cost of Goods Sold and the inventory accounts, how much will be the Cost of Goods Sold after the proration? A. B. C. D.
$58,403 $56,597 $60,197 $54,903
51. The Work-in-Process Inventory account of a manufacturing firm has a balance of $2,400 at the end of an accounting period. The job cost sheets of two uncompleted jobs show charges of $400 and $200 for materials used, and charges of $300 and $500 for direct labor used. Overhead is applied as a percentage of direct labor costs. The predetermined rate is A. B. C. D.
41.7%. 80.0%. 125.0%. 240.0%.
52. The general journal entry to record the issuance of the materials represented by the following materials requisitions for the month includes:
A. a debit to Materials Inventory, $15,945. B. a debit to Materials Inventory, $16,670. C. a debit to Work in Process Inventory, $15,945. D. a credit to Work in Process Inventory, $15,945. E. a credit to Factory Overhead, $725.
53. Tillman Corporation uses job costing and has two production departments, M and A. Budgeted manufacturing costs for the year are as follows:
The actual direct material and direct labor costs charged to Job. No. 432 during the year were as follows:
Tillman applies manufacturing overhead to production orders on the basis of direct labor cost using departmental rates predetermined at the beginning of the year based on the annual budget. The total cost associated with Job. No. 432 for the year should be A. B. C. D.
$50,000. $55,000. $65,000. $75,000.
The following selected data were taken from the books of the Bixby Box Company. The company uses job costing to account for manufacturing costs. The data relate to June operations. A) Materials and supplies were requisitioned from the stores clerk as follows: Job 405, material X, $7,000. Job 406, material X, $3,000; material Y, $6,000. Job 407, material X, $7,000; material Y, $3,200. For general factory use: materials A, B, and C, $2,300. B) Time tickets for the month were chargeable as follows:
C) Other information: Factory paychecks for $36,700 were issued during the month. Various factory overhead charges of $19,400 were incurred on account. Depreciation of factory equipment for the month was $5,400. Factory overhead was applied to jobs at the rate of $3.50 per direct labor hour. Job orders completed during the month: Job 405 and Job 406. Selling and administrative costs were $2,100. Factory overhead is closed out only at the end of the year. 54. If Job 406 were sold on account for $41,500 how much gross profit would be recognized for the job? A. B. C. D.
$3,800 $5,900 $18,500 $35,600
55. The end of the month Work-in-Process Inventory balance would be A. B. C. D.
$18,200. $24,850. $64,100. $88,950.
56. The balance in the factory overhead account would represent the fact that overhead was A. $1,050 underapplied B. $3,150 underapplied C. $1,250 overapplied D. $4,350 overapplied 57. Compute the Work-in-Process transferred to the finished goods warehouse on April 30 using the following information:
A. B. C. D.
$650 $675 $700 $750
The following events took place at a manufacturing company for the current year: (1) Purchased $95,000 in direct materials. (2) Incurred labor costs as follows: (a) direct, $56,000 and (b) indirect, $13,600. (3) Other manufacturing overhead was $107,000, excluding indirect labor. (4) Transferred 80% of the materials to the manufacturing assembly line. (5) Completed 65% of the Work-in-Process during the year. (6) Sold 85% of the completed goods. (7) There were no beginning inventories. 58. What is the company's Cost of Goods Sold? A. B. C. D.
$164,190.00 $139,561.50 $252,600.00 $214,710.50
59. What is the value of the ending Work-in-Process Inventory? A. B. C. D.
$13,261.50 $14,259.00 $88,410.00 $95,060.50
60. What is the journal entry to record the direct labor costs for the period?
A. B. C. D.
a b c d
61. What is the value of the ending Finished Goods Inventory? A. B. C. D.
$13,261.50 $24,628.50 $26,481.00 $164,190.00
Two jobs were worked on during the year: Job A-101 and Job A-102. The number of direct labor hours spent on Job A-101 and Job A-102 were 1,200 and 1,000, respectively. The actual manufacturing overhead was $37,000. 62. What is the predetermined manufacturing overhead rate per direct labor hour for the year? A. B. C. D.
$15 $20 $25 $30
63. What was the amount of manufacturing overhead applied to Job A-101? A. B. C. D.
$16,000 $18,000 $24,000 $44,000
64. What is the amount of the under- or overapplied manufacturing overhead? A. $1,000 underapplied B. $3,000 overapplied C. $4,000 underapplied D. $7,000 overapplied
The Update Company does not maintain backup documents for its computer files. In June, some of the current data were lost, and you have been asked to help reconstruct the data. The following beginning balances on June 1 are known:
Reviewing old documents and interviewing selected employees have generated the following additional information: The production superintendent's job cost sheets indicated that materials of $2,600 were included in the June 30 Work-in-Process Inventory. Also, 300 direct labor hours had been paid at $6.00 per hour for the jobs in process on June 30. The Accounts Payable account is only for direct material purchases. The clerk remembers clearly that the balance in the Accounts Payable on June 30 was $8,000. An analysis of canceled checks indicated payments of $40,000 were made to suppliers during June. Payroll records indicate that 5,200 direct labor hours were recorded for June. It was verified that there were no variations in pay rates among employees during June. Records at the warehouse indicate that the Finished Goods Inventory totaled $16,000 on June 30. Another record kept manually indicates that the Cost of Goods Sold in June totaled $84,000. The predetermined overhead rate was based on an estimated 60,000 direct labor hours for the year and an estimated $180,000 in manufacturing overhead costs. 65. What is the ending balance in the Work-in-Process Inventory on June 30? A. B. C. D.
$4,800 $5,300 $9,300 $9,800
66. What is the amount of direct materials purchased during June? A. B. C. D.
$38,000 $40,000 $42,000 $43,000
67. What is the Cost of Goods Manufactured for June? A. B. C. D.
$89,000 $84,000 $94,000 $99,000
68. How much manufacturing overhead was applied to the Work-in-Process Inventory during June? A. B. C. D.
$12,000 $15,600 $18,400 $20,500
69. What is the ending balance in the Direct Materials Inventory on June 30? A. B. C. D.
$6,000 $10,500 $11,000 $15,000
The financial records for the Lee Manufacturing Company have been destroyed in a fire. The following information has been obtained from a separate set of books maintained by the cost accountant. The cost accountant now asks for your assistance in computing the missing amounts.
70. What is the amount of the materials purchased? A. B. C. D.
$14,400 $16,400 $18,000 $19,600
71. What is the value of the ending Work-in-Process inventory balance? A. B. C. D.
$-0$4,200 $7,500 $8,000
72. What is the value of the beginning Finished Goods Inventory? A. B. C. D.
$-0$4,200 $13,300 $21,700
73. Birk Co. uses a job order costing system. The following debits (credits) appeared in Birk's work-in-process account for the month of April:
Birk applies overhead to production at a predetermined rate of 80% of direct labor cost. Job No. 5, the only job still in process on April 30 has been charged with direct labor of $2,000. What was the amount of direct material charged to Job No.5? (CPA adapted) A. B. C. D.
$3,000 $5,200 $8,800 $24,000
74. The following are Mill Co.'s production costs for October:
What amount of costs should be traced to specific products in the production process? (CPA adapted) A. B. C. D.
$194,000 $190,000 $100,000 $90,000
75. Under Pick Co.'s job order costing system manufacturing overhead is applied to work in process using a predetermined annual overhead rate. During January, Pick's transactions included the following:
Pick had neither beginning nor ending inventory in Work-in-Process Inventory. What was the cost of jobs completed in January? (CPA adapted) A. B. C. D.
$302,000 $310,000 $322,000 $330,000
76. In a traditional job order costing system, the issue of indirect materials to a production department increases: (CPA adapted) A. Stores control. B. Work-in-Process control. C. Factory overhead control. D. Factory overhead applied.
77. Which of the following actions do not cause an impropriety in job costing? A. Misstating the stage of completion. B. Choosing to use normal costing rather than actual costing. C. Charging costs to the wrong job. D. Choosing an allocation method based on the results rather than choosing the method based on resource usage. 78. Which of the following approaches allocates overhead by multiplying a predetermined overhead rate × actual activity? A. Actual costing B. Normal costing C. Regression costing D. Standard costing 79. Which of the following approaches allocates overhead by multiplying an actual overhead rate × actual activity? A. Actual costing B. Normal costing C. Regression costing D. Standard costing 80. Which of the following approaches allocates overhead by multiplying a predetermined rate × standard activity? A. Actual costing B. Normal costing C. Regression costing D. Standard costing 81. Scottso Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machine-hours were 19,050. How much overhead would be applied to production? A. B. C. D.
$266,400. $274,320. $279,607. $287,920.
82. Scottso Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machine-hours were 19,050. How much is the over- or underapplied overhead? A. $21,520 underapplied B. $13,600 underapplied C. $7,920 overapplied D. $0
83. Scottso Corporation applies overhead using an actual costing approach. Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machinehours were 19,050. How much overhead would be applied to production? A. B. C. D.
$266,400. $274,320. $279,607. $287,920.
84. Scottso Corporation applies overhead using an actual costing approach. Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machinehours were 19,050. How much is the over- or underapplied overhead? A. $21,520 underapplied B. $13,600 underapplied C. $7,920 overapplied D. $0 85. Scottso Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $232,750, budgeted machine-hours were 17,500. Actual factory overhead was $227,830, actual machine-hours were 16,150. How much overhead would be applied to production? A. B. C. D.
$214,795 $227,830 $232,750 $246,875
86. Scottso Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $232,750, budgeted machine-hours were 17,500. Actual factory overhead was $227,830, actual machine-hours were 16,150. How much is the over- or underapplied overhead? A. $13,035 overapplied B. $13,035 underapplied C. $4,920 overapplied D. $4,920 underapplied
87. On October 1, the general ledger of Slipshod Company had the following accounts and balances:
The subsidiary ledgers had the following information on October 1:
During October, the following costs were incurred on account:
A summary of the materials requisition slips and the labor time tickets for the month revealed the following distribution:
Overhead is applied based upon direct labor cost. Jobs B81, B83, and B84 were for 8,000, 6,000 and 4,800 units of product respectively, and were completed during October. Jobs B80, B81, B82, and B83 were sold on account for $150,000. Required: Prepare T-accounts for a job order cost system, posting the beginning balances and all transactions for the month. Clearly indicate the end ing balances for the accounts and label the 'cost of goods manufactured' and 'cost of goods sold' amounts.
88. The following selected data were taken from the records of the Bixby Box Company. The company uses a job costing system to account for its manufacturing costs. Bixby's fiscal year runs from January 1 to December 31; manufacturing overhead is closed out only at the end of the fiscal year. The following information relates to August operations. (1.) Jobs in process on August 1.
(2.) Jobs completed during August: W12, X13, Y14. (3.) Material requisitions and labor time tickets indicated the following:
(4.) Jobs sold during August: W12, X13. (5.) Bixby applies overhead to production based upon labor costs. (6.) Selected account balances on August 1 were:
(7.) Various overhead incurred (excluding indirect materials and indirect labor) during August, $13,500. (8.) Materials (direct and indirect) purchased during August, $10,905. Required: (a) What is the balance in the Material Inventory account on August 31? (b) Is the manufacturing overhead account over-or underapplied on August 31? By how much? (c) Compute the cost of goods manufactured for August. (d) Compute the cost of goods sold for August. (e) What is the balance of the Work-in-Process Inventory account on August 31?
89. Carver Test Systems manufactures automated test systems that perform quality inspections during and at the completion of the manufacturing process. As most manufacturing processes are unique, Carver's test equipment is designed to customer specifications, and e ach system has a selling price in excess of $300,000. The company uses a job-order cost system based on the full absorption of actual costs and applies overhead on the basis of machine hours using a predetermined overhead rate. For the fiscal year ended November 30 budgeted manufacturing overhead was $1,960,000, and the expected activity level was 98,000 machine hours. Data regarding several jobs at Carver are presented below. By the end of November all jobs but RX-115 were completed, and all completed jobs had been delivered to customers with the exception of SL-205.
Required:
(a) Determine the balance in the Finished Goods Inventory on November 30. (b) Compute the cost of goods manufactured for November. (c) Compute the Cost of Goods Sold for November. (d) Determine the balance in Work-In-Process Inventory on No vember 30.
90. A manufacturing company employs job costing to account for its costs. There are three production departments, and separate departmental overhead application rates are employed because the operations of the departments are so different. All jobs generally pass through all three production departments. Data regarding the hourly direct labor rates, overhead application rates, and three jobs on which work was done during the month appear below. Job 101 and Job 102 were completed during the current month. (CIA Examination adapted)
Required:
(a) Compute the completed costs of Job 101 and Job 102. (b) Compute the value of the Work-in-Process Inventory at the end of the month.
91. Baby Care Manufacturing Company is a manufacturer of furnishings for infants and children. The company uses job costing and employs a full absorption accounting method for cost accumulation. Baby Care's Work-in-Process Inventory on April 30 consisted of the following jobs:
Baby Care applies manufacturing overhead on the basis of direct labor hours. The company's estimated manufacturing overhead for the period ending May 31 totals $4,500,000; the company estimated it would use 600,000 direct labor hours during the year. At the end of April, the balance in Baby Care's Materials Inventory, which includes both materials and purchased parts, was $668,000. Additions to, and requisitions from, the materials inventory during the month of May included the following:
During the month of May, Baby Care's factory payroll consisted of the following:
Listed below are the jobs that were completed and the units that were sold during the month of May.
Required:
(a) Compute the value of Baby Care's Work-in-Process Inventory on May 31. (b) Compute the value of Baby Care's Cost of Goods Manufactured for May.
92. Shawano Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $266,400 and budgeted machine-hours were 18,500. Actual factory overhead was $287,920 and actual machine-hours were 19,050. Before disposition of over- or underapplied overhead, the cost of goods sold was $560,000 and ending inventories were as follows:
Required: a. Compute the amount of overhead applied to production. b. Prepare the journal entry to dispose of the over/under-applied overhead using the write-off to cost of goods sold approach. c. Prepare the journal entry to dispose of the over/under-applied overhead using the proration approach.
93. Prepare the necessary journal entries from the following information for Beaulieu Company. a. Purchased materials on account, $56,700. b. Requisitioned materials for production as follows: direct materials - 80 percent of purchases, indirect materials - 15 percent of purchases c. Direct labor for production is $33,100, indirect labor is $12,500. d. Overhead incurred (not including materials or overhead): $52,900. e. Overhead is applied to production based on direct labor cost at the rate of 220 percent. f. Goods costing $97,600 were completed during the period. g. Goods costing $51,320 were sold on account for $77,600. h. Close the overhead control account to Cost of Goods Sold.
94. Danner Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $375,000 and budgeted machine-hours were 12,500. Actual factory overhead was $387,920 and actual machinehours were 13,150. Required: a. Compute the overhead application rate. b. Compute the amount of overhead applied to production. c. Determine the amount of over- or underapplied overhead.
95. The following selected data were taken from the books of the Bixby Box Company. The company uses job costing to account for manufacturing costs. The data relate to June operations. A) Materials and supplies were requisitioned from the stores clerk as follows: Job 405, material X, $7,000. Job 406, material X, $3,000; material Y, $6,000. Job 407, material X, $7,000; material Y, $3,200. For general factory use: materials A, B, and C, $2,300. B) Time tickets for the month were chargeable as follows:
C) Other information: Beginning work-in-process, June 1, $-0Factory paychecks for $36,700 were issued during the month. Various factory overhead charges of $19,400 were incurred on account. Depreciation of factory equipment for the month was $5,400. Factory overhead was applied to jobs at the rate of $35.00 per direct labor hour. Job orders completed during the month: Job 405 and Job 406. Selling and administrative costs were $2,100. Factory overhead is closed out only at the end of the year. Required: (a) Determine the ending work-in-process balance on June 30. (b) Determine the cost of goods manufactured for June. (c) Is factory overhead over- or underapplied for June? What is the monthly value?
96. Rosebud Manufacturing uses actual costing. The following events took place during the current year: (1) Purchased $95,000 in direct materials. (2) Incurred labor costs as follows: (a) direct, $56,000 and (b) indirect, $13,600. (3) Other manufacturing overhead was $107,000, excluding indirect labor. (4) Transferred 80% of the materials to the manufacturing assembly line. (5) Completed 65% of the Work-in-Process during the year. (6) Sold 85% of the completed goods. (7) There were no beginning inventories. Required: (a) Determine the ending Direct Materials Inventory balance. (b) Determine the ending Work-in-Process Inventory balance. (c) Determine the ending Finished Goods Inventory balance. (d) Determine the Cost of Goods Manufactured.
97. The Cedar Company does not maintain backup documents for its computer files. In June, some of the current data were lost, and you have been asked to help reconstruct the data. The following beginning balances are known:
Reviewing old documents and interviewing selected employees have generated the following additional information: The production superintendent's job cost sheets indicated that materials of $5,200 were included in the June 30 Work-in-Process Inventory. Also, 300 direct labor hours had been paid at $12.00 per hour for the jobs in process on June 30. The Accounts Payable account is only for direct material purchases. The clerk remembers clearly that the balance in the Accounts Payable on June 30 was $16,000. An analysis of canceled checks indicated payments of $80,000 were made to suppliers during June. Payroll records indicate that 5,200 direct labor hours were recorded for June. It was verified that there were no variations in pay rates among employees during June. Records at the warehouse indicate that the Finished Goods Inventory totaled $32,000 on June 30. Another record kept manually indicates that the Cost of Goods Sold in June totaled $168,000. The predetermined overhead rate was based on an estimated 60,000 direct labor hours for the year and an estimated $360,000 in manufacturing overhead costs. Required: (a) Compute the Cost of Goods Manufactured. (b) Compute the ending Work-in-process inventory balance. (c) Compute the ending Direct Materials Inventory balanc e.
98. The financial records for the Lee Manufacturing Company have been destroyed in a flood. The following information has been obtained from a separate set of books maintained by the cost accountant. The cost accountant now asks for your assistance in computing the missing amounts.
Required: Compute the following: (a) direct materials purchased (b) ending Work-in-process inventory (c) beginning Finished goods inventory
99. The Bisson Company had the following transactions and events during its first year of operations. Estimated overhead for the year was $770,000; estimated direct labor cost for the year was $350,000. a. Purchased materials on account, $567,000. b. Requisitioned materials for production as follows: direct materials - 85 percent of purchases, indirect materials - 12 percent of purchases c. Direct labor for production is $331,000, indirect labor is $125,000. d. Overhead incurred (not including materials or labor): $529,000. e. Overhead is applied to production based on direct labor cost at the rate of ___ percent. f. Goods costing $976,000 were completed during the period. g. Goods costing $513,200 were sold on account for $776,000. Required: Determine the ending balances for: (a) Materials inventory (b) Work-in-process inventory (c) Finished goods inventory
100.The Brisebois Company had the following transactions and events during its first year of operations. Estimated overhead for the year was $770,000; estimated direct labor cost for the year was $350,000. a. Purchased materials on account, $567,000. b. Requisitioned materials for production as follows: direct materials - 85 percent of purchases, indirect materials - 12 percent of purchases c. Direct labor for production is $331,000, indirect labor is $125,000. d. Overhead incurred (not including materials or labor): $529,000. e. Overhead is applied to production based on direct labor cost at the rate of ___ percent. f. Goods costing $976,000 were completed during the period. g. Goods costing $513,200 were sold on account for $776,000. Required: (1) Prepare the journal entries to record the transactions for the year. (2) Prepare the journal entry to prorate the over- or underapplied overhead to the appropriate accounts.
101.In February, Forester Engineering worked on three contracts: 1,200 hours for Tarvell Company, 1,100 hours for Natron LLC and 3,400 for Lisere Corp. Forester bills clients at the rate of $150 per hour; labor cost for its engineering staff is $45 per hour. The total number of hours worked in February was 6,000 (any untraced hours are considered overhead), and non-labor overhead costs were $325,000. Overhead is applied to clients at $55 per labor-hour. In addition, Forester had $243,000 in marketing and administrative costs. All transactions are on account. All services were billed. Required: a. Determine the cost of each of the three jobs. b. What is the amount of over- or underapplied overhead? c. How much operating profit did Forester make in February? Assume the over- or underapplied overhead is not closed out each month.
102.Mounder Manufacturing Company employs job costing to account for its costs. There are three production departments, and separate departmental overhead application rates are employed. All jobs generally pass through all three production departments. Data regarding the hourly direct labor rates, overhead application rates, and three jobs on which work was done during the month appear below. Job 611 and Job 613 were completed during the current month, Job 612 was still in process. (CIA Examination adapted)
Required:
(a) Compute the completed costs of Job 611 and Job 613. (b) Compute the value of the Work-in-Process Inventory at the end of the month.
103.Misa Company applies overhead based upon labor-hours. Budgeted factory overhead was $910,000 and budgeted labor-hours were 32,500. Actual factory overhead was $893,675 and actual labor-hours were 31,560. Required: a. Compute the overhead application rate. b. Compute the amount of overhead applied to production. c. Determine the amount of over- or underapplied overhead.
104.Becker Company applies overhead at a rate of $26 per direct labor hour. Budgeted labor hours were 25,000; actual labor hours exceeded the budget by 1,600 hours. Overhead was overapplied by $3,758. Required: (a) Compute the budgeted overhead for the year. (b) Compute actual overhead for the year.
105.Bailey's Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $325,000 and budgeted machine-hours were 13,000. Actual factory overhead was $312,330 and actual machine-hours were 12,660. Before disposition of over- or underapplied overhead, the cost of goods sold was $725,000 and ending inventories were as follows:
Required: a. Compute the amount of overhead applied to production. b. Prepare the journal entry to dispose of the over/under-applied overhead using the write-off to cost of goods sold approach. c. Prepare the journal entry to dispose of the over/under-applied overhead using the proration approach.
106.The Perrot Company is a computer repair shop and had the following transactions and events during the year. Estimated overhead for the year was $175,000; estimated labor for the year was 6,000 hours. a. Purchased materials on account, $126,000. b. Traced materials to repair jobs $110,880; general shop materials used $9,500. c. Labor traced to repair jobs $165,000, untraced labor was $22,200. d. Overhead incurred (not including materials or labor): $139,600. e. Overhead is applied to repair jobs based on labor hours. All workers were paid $30/hr. f. Ending work-in-process consisted of one repair job with a cost of $1,976. There was no beginning workin-process. g. Repair jobs were billed to the customers for $476,000. Required: (1) Prepare the journal entries to record the transactions for the year. (2) Prepare the journal entry to write-off the over- or underapplied overhead to the cost of repair jobs. (3) What would Perrot's operating profit for the year?
107.Why might a company use a predetermined rate for applying overhead rather than just apply actual overhead?
108.Describe the difference between normal costing, actual costing, and standard costing.
109.How does job costing for a service organization differ from job costing for a manufacturer?
110.Describe three possible unethical actions that can cause impropriety in job costing.
111.Describe two alternative approaches to the handling of over- or underapplied overhead.
ch7 Key 1.
A job is a product or service that can be easily and conveniently distinguished from other products/ services. TRUE
This is the definition of a job. AACSB: Analytic AICPA: FN-Measurement Blooms: Knowledge Difficulty: Easy Lanen - Chapter 07 #1 Learning Objective: 1 Topic Area: Defining a Job
2.
Job cost sheets are used in accounting systems as a subsidiary ledger for the Work-in-Process account. TRUE
Job cost sheets contain the details of the unfinished work. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #2 Learning Objective: 1 Topic Area: Defining a Job
3.
Job shops have three types of inventory accounts: Finished Goods, Work-in-Process, and Direct Materials. TRUE
A fourth account, overhead, is not an inventory. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #3 Learning Objective: 2 Topic Area: Computing the Cost of a Job
4.
The cost in the ending Finished Goods inventory account consists of the direct materials, direct labor, and manufacturing overhead of all jobs still in process at the end of the period. FALSE
Cost of all jobs that are completed but unsold. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Medium Lanen - Chapter 07 #4 Learning Objective: 2 Topic Area: Computing the Cost of a Job
5.
Accounting for direct materials and direct labor is easier than accounting for manufacturing overhead costs. TRUE
This is due to the traceability of direct costs. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #5 Learning Objective: 2 Topic Area: Computing the Cost of a Job
6.
Indirect material and indirect labor are two examples of manufacturing overhead costs. TRUE
The key term is "indirect". AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #6 Learning Objective: 2 Topic Area: Computing the Cost of a Job
7.
The journal entry to record actual manufacturing overhead for indirect material debits Manufacturing Overhead (Control) and credits Accounts Payable. FALSE
The credit would be to a materials inventory. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #7 Learning Objective: 2 Topic Area: Manufacturing Overhead
8.
The journal entry to record actual manufacturing overhead for indirect labor debits Manufacturing Overhead (Control) and credits Work-in-Process inventory. FALSE
The credit would be to Payroll or Wages Payable, not Work-in-process. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Easy Lanen - Chapter 07 #8 Learning Objective: 2 Topic Area: Manufacturing Overhead
9.
The periodic allocation of manufacturing overhead costs to job cost sheets is based on an event, not a transaction. TRUE
Either the completion of the job or the end of the period. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Hard Lanen - Chapter 07 #9 Learning Objective: 3 Topic Area: Manufacturing Overhead
10.
The predetermined overhead rate is computed by dividing the estimated activity of the allocation base into the estimated manufacturing overhead costs. TRUE
Rate = estimated overhead/estimated activity AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Medium Lanen - Chapter 07 #10 Learning Objective: 3 Topic Area: Manufacturing Overhead
11.
The journal entry to apply manufacturing overhead costs to completed jobs credits either Applied Manufacturing Overhead or Manufacturing Overhead (Control). TRUE
The debit would be to Work-In-Process. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Easy Lanen - Chapter 07 #11 Learning Objective: 3 Topic Area: Manufacturing Overhead
12.
At the end of the accounting period, manufacturing overhead costs are applied to uncompleted jobs using the same predetermined overhead rate that is used to apply manufacturing overhead costs to completed jobs. TRUE
The same rate is used for all of the work during the period. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #12 Learning Objective: 3 Topic Area: Over- and Underapplied Overhead
13.
Overapplied overhead occurs when the actual overhead costs incurred during a period are greater than the overhead costs applied during the period. FALSE
Overapplied is when actual is less than applied. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Medium Lanen - Chapter 07 #13 Learning Objective: 3 Topic Area: Over- and Underapplied Overhead
14.
Underapplied overhead occurs when the actual overhead costs incurred during a period are greater than the overhead costs applied during the period. TRUE
Or when applied is less than actual. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Medium Lanen - Chapter 07 #14 Learning Objective: 3 Topic Area: Over- and Underapplied Overhead
15.
Normal costing uses the actual allocation base activity to apply manufacturing overhead costs to jobs during the period. TRUE
It uses the estimated allocation base activity to determine the rate. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #15 Learning Objective: 3 Topic Area: Using Normal, Actual, and Standard Costing
16.
Actual costing does not use a predetermined overhead rate to apply manufacturing overhead costs to jobs completed during the period. TRUE
The application rate is determined at the end of the period based on actual costs. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Medium Lanen - Chapter 07 #16 Learning Objective: 3 Topic Area: Using Normal, Actual, and Standard Costing
17.
Service organizations, by their nature, cannot have a balance in Work-in-Process Inventory. FALSE
A service may take several accounting periods to complete so there may very well be a Work-InProcess. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Medium Lanen - Chapter 07 #17 Learning Objective: 4 Topic Area: Using Job Costing in Service Organizations
18.
Service organizations generally use the same job costing procedures as manufacturers. TRUE
The difference is the "good" being produced is intangible. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #18 Learning Objective: 4 Topic Area: Using Job Costing in Service Organizations
19.
It is unethical to intentionally charge costs to the wrong job. TRUE
It is unethical to knowingly do something wrong. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Easy Lanen - Chapter 07 #19 Learning Objective: 5 Topic Area: Ethical Issues and Job Costing
20.
One difference between jobs and projects is the account titles used in the costing process. FALSE
The main difference is the length of time to complete the work. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #20 Learning Objective: 6 Topic Area: Managing Projects
21.
Which of the following statements is (are) true regarding product costing? (A) A job is a cost object that can be easily and conveniently distinguished from other cost objects. (B) Job cost sheets are used in accounting systems as a subsidiary ledger for the Work-in-Process account. A. Only A is true. B. Only B is true. C. Both A and B are true. D. Neither A nor B is true. Both statements are true. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #21 Learning Objective: 1 Topic Area: Defining a Job
22.
For which of the following businesses would the job order cost system be appropriate? A. Auto repair shop
B. Crude oil refinery C. Drug manufacturer D. Root beer producer In auto repair, each job will require different resources. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #22 Learning Objective: 1 Topic Area: Defining a Job
23.
Which of the following is not a characteristic of job costing? A. B. C. D.
Each job is distinguishable from other jobs. Identical units are produced on an ongoing basis. Job cost data are used for setting prices and bids. It is not possible to compare actual costs with estimated costs.
Job costing is used when there is variety in the units produced. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #23 Learning Objective: 1 Topic Area: Defining a Job
24.
Which of the following companies would most likely use job costing? A. Paper manufacturer B. Paint producer C. Breakfast cereal maker D. Advertising agency Every advertising client has different requirements. The other three strive to have a uniform product. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #24 Learning Objective: 1 Topic Area: Defining a Job
25.
The journal entry to record the completion of a job in a job order cost system is
A. B. C. D. E.
a b c d e
When a job is complete it leaves work-in-process and goes to finished goods. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Easy Lanen - Chapter 07 #25 Learning Objective: 2 Topic Area: Computing the Cost of a Job
26.
The journal entry to record requisitions of material for new jobs started during the period is
A. a
B. C. D. E.
b c d e
A requisition is a request for material from the production process, so it is materials entering production. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Easy Lanen - Chapter 07 #26 Learning Objective: 2 Topic Area: Computing the Cost of a Job
27.
Which of the following documents is used as the basis for posting to the direct materials section of the job cost sheet? A. Purchase requisition. B. Materials requisition. C. Receiving report. D. Purchase order. E. Time card. Purchase requisition, purchase order, and receiving report are documents when the materials are purchased and received. This question asks about usage of materials. AACSB: Analytic AICPA: FN-Measurement Blooms: Knowledge Difficulty: Easy Lanen - Chapter 07 #27 Learning Objective: 2 Topic Area: Computing the Cost of a Job
28.
Which of the following documents is used as the basis for posting to the direct labor section of the job cost sheet? A. Purchase requisition. B. Materials requisition. C. Receiving report. D. Purchase order. E. Time card. Only the time card has to do with labor—the other four are materials documents. AACSB: Analytic AICPA: FN-Measurement Blooms: Knowledge Difficulty: Easy Lanen - Chapter 07 #28 Learning Objective: 2 Topic Area: Computing the Cost of a Job
29.
Which of the following accounts is used to accumulate the actual manufacturing overhead costs incurred during a period? A. Applied Manufacturing Overhead B. Work-in-Process Inventory C. Manufacturing Overhead Control D. Cost of Goods Sold E. Finished Goods Inventory Since this is "actual" overhead it would not go to "Applied". Manufacturing Overhead Control would get the actual overheads. AACSB: Analytic AICPA: FN-Measurement Blooms: Knowledge Difficulty: Easy Lanen - Chapter 07 #29 Learning Objective: 2 Topic Area: Computing the Cost of a Job
30.
The journal entry to record the actual manufacturing overhead costs for indirect material is
A. a
B. C. D. E.
b c d e
It would increase manufacturing overhead control. The materials are coming out of materials inventory. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Easy Lanen - Chapter 07 #30 Learning Objective: 2 Topic Area: Computing the Cost of a Job
31.
What are the transfers-out from the Finished Goods Inventory called? A. Cost of Goods Manufactured B. Cost of Goods Available C. Cost of Goods Completed D. Cost of Goods Sold Product leaves finished goods when it is sold. AACSB: Analytic AICPA: FN-Measurement Blooms: Knowledge Difficulty: Easy Lanen - Chapter 07 #31 Learning Objective: 3 Topic Area: Computing the Cost of a Job
32.
In a job costing system, the dollar amount in the journal entry that transfers the costs of jobs from Work-in-Process Inventory to Finished Goods Inventory is the sum of the costs charged to all jobs A. sold during the period. B. completed during the period. C. in process during the period. D. started in process during the period. E. completed and sold during the period. Goods produced enter the finished goods; goods sold leave the account. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Medium Lanen - Chapter 07 #32 Learning Objective: 3 Topic Area: Computing the Cost of a Job
33.
Which of the following events or transactions will not result in manufacturing overhead being applied to production? A. B. C. D.
Completion of a job in the current period that was started in a prior period Completion of a job in the current period that was started in the current period Preparing financial statements when work is in process at the end of the period Preparing financial statements when there is no work in process at the end of the period
If there is no work-in-process inventory, there is nothing to apply overhead to. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Hard Lanen - Chapter 07 #33 Learning Objective: 3 Topic Area: Manufacturing Overhead
34.
The journal entry to record the completion of a job in a job costing system is
A. B. C. D. E.
a b c d e
The completed goods go to finished goods, they come from work-in-process. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Easy Lanen - Chapter 07 #34 Learning Objective: 3 Topic Area: Computing the Cost of a Job
35.
It is possible that the total cost of a job started in April and completed in May will not include: A. direct material added in April. B. direct labor added in May. C. applied overhead in April. D. applied overhead in May. E. direct material purchased in May. Materials purchased in the month of May may not make it into production that month. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Hard Lanen - Chapter 07 #35 Learning Objective: 3 Topic Area: Computing the Cost of a Job
36.
Underapplied overhead occurs when the balance in the Manufacturing Overhead Control account is: A. greater than the balance in the Applied Manufacturing Overhead account.
B. equal to the balance in the Applied Manufacturing Overhead account. C. less than the balance in the Applied Manufacturing Overhead account. D. less than the balance in the Finished Goods Inventory account. Underapplied means less is applied than is actual; the balance in the applied would be smaller than the actual amount. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #36 Learning Objective: 3 Topic Area: Over- and Underapplied Overhead
37.
Which of the following statements is (are) true regarding the application of manufacturing overhead? (A) Manufacturing overhead is only recorded on the job cost sheets when (a) financial statements are prepared or a job is completed. (B) Overapplied overhead occurs when the actual overhead costs incurred during a period are greater than the overhead costs applied during the period. A. Only A is true.
B. Only B is true. C. Both A and B are true. D. Neither A nor B is true. (B) is false because overapplied is when actual is less than applied. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Medium Lanen - Chapter 07 #37 Learning Objective: 3 Topic Area: Manufacturing Overhead
38.
The journal entry to write-off an insignificant underapplied overhead balance at the end of an accounting period is
A. a
B. b C. c D. d An insignificant amount is closed directly to cost of goods sold. Since it is underapplied, cost of goods sold needs more overhead applied and would be debited. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #38 Learning Objective: 3 Topic Area: Writing Off Over- and Underapplied Overhead
39.
The journal entry to write-off a significant underapplied overhead balance at the end of an accounting period is
A. B. C. D.
a b c d
A significant amount would be prorated to WIP, FG and COGS. Since it is underapplied, the accounts need more overhead applied and would be debited. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #39 Learning Objective: 3 Topic Area: Writing Off Over- and Underapplied Overhead
40.
If a company multiplies its predetermined overhead rate by the actual activity level of its allocation base, it is using A. standard costing. B. normal costing. C. actual costing. D. budget costing. E. ideal costing. Predetermined rate implies either standard or normal costing. Actual activity level is used by normal; standard activity level is used by standard costing. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Medium Lanen - Chapter 07 #40 Learning Objective: 3 Topic Area: Using Normal, Actual, and Standard Costing
41.
If a company multiplies its actual overhead rate by the actual activity level of its allocation base, it is using A. standard costing. B. normal costing. C. actual costing. D. budget costing. E. ideal costing. Actual overhead rate implies an actual costing system. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #41 Learning Objective: 3 Topic Area: Using Normal, Actual, and Standard Costing
42.
One of the primary differences between job costing for service and manufacturing companies is service firms generally A. use fewer direct materials.
B. have less direct labor. C. do not use predetermined overhead rates. D. have no Work in Process Inventory. Services are more intangible and have less materials. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #42 Learning Objective: 4 Topic Area: Using Job Costing in Service Organizations
43.
Which of the following is not a difference between job costing for service firms and job costing for manufacturing companies? A. B. C. D.
Service firms generally use fewer direct materials that manufacturing companies. Service firms' overhead accounts have slightly different titles (e.g., Applied Service Overhead). Service firms' finished jobs are charged to Cost of Services Billed instead of Cost of Goods Sold. Service firms' costs are immediately expensed since all work is completed during a period.
Not all service jobs are completed in a period. There may very well be a work-in-process. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #43 Learning Objective: 4 Topic Area: Using Job Costing in Service Organizations
44.
The journal entry to record the completion of a contract in a job costing system for a service firm is
A. B. C. D. E.
a b c d e
There are no finished goods—revenue is recognized when the service is complete. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Easy Lanen - Chapter 07 #44 Learning Objective: 4 Topic Area: Using Job Costing in Service Organizations
45.
The jour journal nal entr entry y to writ write-o e-off ff an an insign insignifi ificant cant overap overappli plied ed overh overhead ead bala balance nce at at the the end of of an accou accounti nting ng period for a service firm is
A. B. C. D.
a b c d
Insignificant amount would be closed to the cost of services, same as a product-based company would close to COGS. It is a credit since too much overhead was applied. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #45 Learning Objective: 4 Topic Area: Using Job Costing in Service Organizations
46.
Comple Complex x jobs jobs that that take take multi multiple ple time time peri periods ods and and requi require re the the work work of many differ different ent depa departm rtment ents, s, divisions, or subcontractors are called A. clients. A. clients. B. projects. C. customers. C. D. contracts. D. contracts. E. vendors. E. This is the definition of a project. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Easy Lanen - Chapter 07 #46 Learning Objective: 6 Topic Area: Managing Projects
47.
Manufa Manufactu cturin ring g overh overhead ead appl applied ied on on the the basis basis of of direc directt labor labor hours hours was was $120,0 $120,000, 00, while while actu actual al manufacturing overhead incurred was $124,000 $124 ,000 for the month of April. Which of the following is always true given the statement above? A. Overhead was overapplied by $4,000. A. Overhead B. Overhead was underapplied by $4,000. C. Actual direct labor hours exceeded budgeted direct labor labor hours. D. Actual direct labor hours were less than budgeted direct labor hours. Actual $124,000 - Applied $120,000 = $4,000 underapplied. AACSB: Analytic AICPA: FN-Measurement Blooms: Analysis Difficulty: Medium Lanen - Chapter 07 #47 Learning Objective: 3 Topic Area: Manufacturing Overhead
48.
The pred predete etermi rmined ned over overhead head rate rate for manufa manufactu cturin ring g overhe overhead ad for for 2008 2008 is $4.00 $4.00 per dire direct ct labor labor hour. hour. Employees are expected to earn $5.00 per hour and the company is planning on paying its employees $100,000 during the year. However, only 75% of the employees are classified as "direct labor." What was the estimated manufacturing overhead for 2008? A. $60,000
B. $75,000 B. C. $80,000 C. D. $93,750 D. $93,750 ($100,000 × .75)/$5.00 = 15,000 hours; 15,000 × $4.00 = $60,000 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #48 Learning Objective: 3 Topic Area: Manufacturing Overhead
49.
Before Before prorat prorating ing the manuf manufact acturi uring ng overh overhead ead cost costss at the end of of 2008, 2008, the Cost Cost of Goods Goods Sold Sold and and Finished Goods Inventory had applied overhead costs of $57,500 and $20,000 in them, respectively. There was no Work-in-Process at the beginning or end of 2008. During the year, manufacturing overhead costs of $74,000 were actually incurred. The balance in the Applied Manufacturing Overhead was $77,500 at the end of 2008. If the under or overapplied overhead is prorated between Cost of Goods Sold and the inventory accounts, how much will be allocated to the Finished Goods Inventory? A. $903
B. $1,217 B. C. $1,283 C. D. $2,597 D. $2,597 $77,500 - 74,000 = $3,500 overapplied overhead; [$20,000/(57,500 + 20,000)] × $3,500 = $903 AACSB: Analytic AICPA: FN-Measurement Blooms: Analysis Difficulty: Medium Lanen - Chapter 07 #49 Learning Objective: 3 Topic Area: Allocating Over- or Underapplied Overhead
50.
Before Before prorat prorating ing the manuf manufact acturi uring ng overh overhead ead cost costss at the end of of 2008, 2008, the Cost Cost of Goods Goods Sold Sold and and Finished Goods Inventory had applied overhead costs of $57,500 and $20,000 in them, respectively. There was no work in process at the beginning or end of 2008. During the year, manufacturing overhead costs of $74,000 were actually incurred. The balance in the Applied Manufacturing Overhead was $77,500 at the end of 2008. If the under- or overapplied overhead is prorated between Cost of Goods Sold and the inventory accounts, how much will be the Cost of Goods Sold after the proration? A. $58,403 A. $58,403 B. $56,597 B. C. $60,197 C. D. $54,903 $77,500 - 74,000 = $3,500 overapplied overhead; [$57,500/(57,500 + 20,000)] × $3,500 = $2,597; $57,500 - 2,597 = $54,903 AACSB: Analytic AICPA: FN-Measurement Blooms: Analysis Difficulty: Hard Lanen - Chapter 07 #50 Learning Objective: 3 Topic Area: Allocating Over- or Underapplied Overhead
51.
The Work-in-Process Inventory account of a manufacturing firm has a balance of $2,400 at the end of an accounting period. The job cost sheets of two uncompleted jobs show charges of $400 and $200 for materials used, and charges of $300 and $500 for direct labor used. Overhead is applied as a percentage of direct labor costs. The predetermined rate is A. 41.7%. B. 80.0%. C. 125.0%. D. 240.0%. Overhead = $2,400 - (400 + 200) - (300 + 500) = $1,000; Overhead rate = $1,000/(300 + 500) = 125.0% AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #51 Learning Objective: 3 Topic Area: Manufacturing Overhead
52.
The general journal entry to record the issuance of the materials represented by the following materials requisitions for the month includes:
A. a debit to Materials Inventory, $15,945. B. a debit to Materials Inventory, $16,670. C. a debit to Work in Process Inventory, $15,945. D. a credit to Work in Process Inventory, $15,945. E. a credit to Factory Overhead, $725. $5,250 + 3,700 + 4,525 + 2,470 = $15,945 to Work-in-Process Inventory AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #52 Learning Objective: 2 Topic Area: Computing the Cost of a Job
53.
Tillma Tillman n Corpor Corporati ation on uses uses job job costi costing ng and and has has two two produc productio tion n depar departme tments nts,, M and and A. Budget Budgeted ed manufacturing costs for the year are as follows:
The actual direct material and direct labor costs charged to Job. No. 432 during the year were as follows:
Tillman applies manufacturing overhead to production orders on the basis of direct labor cost using departmental rates predetermined at the beginning of the year based on the annual budget. The total cost associated with Job. No. 432 for the year should be A. $50,000. A. $50,000. B. $55,000. B. C. $65,000. C. D. $75,000. [($600,000/200,000) × $8,000] + [($400,000/800,000) × $12,000] = $30,000; $25,000 + 20,000 + 30,000 = $75,000 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #53 Learning Objective: 2 Learning Objective: 3 Topic Area: Computing the Cost of a Job
The following selected data were taken from the books of the Bixby Box Company. The company uses job costing to account for manufacturing costs. The data relate to June operations. A) Materials and supplies were requisitioned from the stores clerk as follows: Job 405, material X, $7,000. Job 406, material X, $3,000; material Y, $6,000. Job 407, material X, $7,000; material Y, $3,200. For general factory use: materials A, B, and C, $2,300. B) Time tickets for the month were chargeable chargeab le as follows:
C) Other information: Factory paychecks for $36,700 were issued during the month. Various factory overhead charges of $19,400 were incurred on account. Depreciation of factory equipment for the month was $5,400. Factory overhead was applied to jobs at the rate of $3.50 per direct labor hour. Job orders completed during the month: Job 405 and Job 406. Selling and administrative costs were $2,100. Factory overhead is closed out only at the end of the year. Lanen - Chapter 07
54.
If Job Job 406 406 were were sold sold on on accoun accountt for for $41,5 $41,500 00 how how much much gross gross profit profit would would be recog recognize nized d for for the the job? job? A. $3,800 A. $3,800 B. $5,900 C. $18,500 C. D. $35,600 D. $35,600 $41,500 - [($3,000 + 6,000) + $14,000 + ($3.50 × 3,600)] = $5,900 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #54 Learning Objective: 2 Learning Objective: 3 Topic Area: Computing the Cost of a Job
55. 55.
The end end of the the mont month h Wor Workk-in in-P -Pro roce cess ss Inve Invent ntor ory y bala balance nce woul would d be A. $18,200. A. $18,200. B. $24,850. C. $64,100. C. D. $88,950. D. $88,950. [($7,000 + 3,200) + $8,000 + ($3.50 × 1,900)] = $24,850 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #55 Learning Objective: 2 Learning Objective: 3 Topic Area: Computing the Cost of a Job
56.
The balance balance in the the fact factory ory overhe overhead ad accou account nt woul would d repre represen sentt the the fact fact that that overh overhead ead was A. $1,050 underapplied
B. $3,150 underapplied B. $3,150 C. $1,250 C. $1,250 overapplied D. $4,350 D. $4,350 overapplied Manufacturing Overhead Control = $2,300 + 3,700 + 19,400 + 5,400 = $30,800 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Hard Lanen - Chapter 07 #56 Learning Objective: 3 Topic Area: Manufacturing Overhead
57.
Compute the Work-in-Process transferred to the finished goods warehouse on April 30 using the following information:
A. $650 B. $675 C. $700 D. $750 $200 + 125 + 300 + 250 - 175 = $700 Cost of Goods Manufactured AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Easy Lanen - Chapter 07 #57 Learning Objective: 2 Topic Area: Computing the Cost of a Job
The following events took place at a manufacturing company for the current year: (1) Purchased $95,000 in direct materials. (2) Incurred labor costs as follows: (a) direct, $56,000 an d (b) indirect, $13,600. (3) Other manufacturing overhead was $107,000, excluding indirect labor. (4) Transferred 80% of the materials to the manufacturing a ssembly line. (5) Completed 65% of the Work-in-Process during the year. (6) Sold 85% of the completed goods. (7) There were no beginning inventories. Lanen - Chapter 07
58.
What is the company's Cost of Goods Sold? A. $164,190.00 B. $139,561.50 C. $252,600.00 D. $214,710.50 [$0 + .80(95,000) + 56,000 + ($107,000 + 13,600)].65 = $164,190; .85($164,190) = $139,561.50 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #58 Learning Objective: 2 Topic Area: Computing the Cost of a Job
59.
What is the value of the ending Work-in-Process Inventory? A. $13,261.50 B. $14,259.00 C. $88,410.00 D. $95,060.50 [$0 + .80(95,000) + 56,000 + ($107,000 + 13,600)].35 = $88,410 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #59 Learning Objective: 2 Topic Area: Computing the Cost of a Job
60.
What is the journal entry to record the direct labor costs for the period?
A. B. C. D.
a b c d
Direct labor costs are traced to the work in process; indirect labor would go to manufacturing overhead. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Easy Lanen - Chapter 07 #60 Learning Objective: 2 Topic Area: Computing the Cost of a Job
61.
What is the value of the ending Finished Goods Inventory? A. $13,261.50 B. $24,628.50 C. $26,481.00 D. $164,190.00 [$0 + .80(95,000) + 56,000 + ($107,000 + 13,600)].65 = $164,190; .15($164,190) = $24,628.50 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #61 Learning Objective: 2 Topic Area: Computing the Cost of a Job
Two jobs were worked on during the year: Job A-101 and Job A-102. The number of direct labor hours spent on Job A-101 and Job A-102 were 1,200 and 1,000, respectively. The actual manufacturing overhead was $37,000. Lanen - Chapter 07
62.
What is the predetermined manufacturing overhead rate per direct labor hour for the year? A. $15
B. $20 C. $25 D. $30 $30,000/2,000 = $15 per DLH AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Easy Lanen - Chapter 07 #62 Learning Objective: 2 Learning Objective: 3 Topic Area: Manufacturing Overhead
63.
What was the amount of manufacturing overhead applied to Job A-101? A. $16,000 B. $18,000 C. $24,000 D. $44,000 $15 × 1,200 = $18,000 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Easy Lanen - Chapter 07 #63 Learning Objective: 2 Topic Area: Manufacturing Overhead
64.
What is the amount of the under- or overapplied manufacturing overhead? A. $1,000 underapplied B. $3,000 overapplied C. $4,000 underapplied D. $7,000 overapplied $37,000 - [$15 × (1,200 + 1,000)] = $4,000 underapplied AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #64 Learning Objective: 2 Topic Area: Over- and Underapplied Overhead
The Update Company does not maintain backup documents for its computer files. In June, some of the current data were lost, and you have been asked to help reconstruct the data. The following beginning balances on June 1 are known:
Reviewing old documents and interviewing selected employees have generated the following additional information: The production superintendent's job cost sheets indicated that materials of $2,600 were included in the June 30 Work-in-Process Inventory. Also, 300 direct labor hours had been paid at $6.00 per hour for the jobs in process on June 30. The Accounts Payable account is only for direct material purchases. The clerk remembers clearly that the balance in the Accounts Payable on June 30 was $8,000. An analysis of canceled checks indicated payments of $40,000 were made to suppliers during June. Payroll records indicate that 5,200 direct labor hours were recorded for June. It was verified that there were no variations in pay rates among employees during June. Records at the warehouse indicate that the Finished Goods Inventory totaled $16,000 on June 30. Another record kept manually indicates that the Cost of Goods Sold in June totaled $84,000. The predetermined overhead rate was based on an estimated 60,000 direct labor hours for the year and an estimated $180,000 in manufacturing overhead costs. Lanen - Chapter 07
65.
What is the ending balance in the Work-in-Process Inventory on June 30? A. $4,800 B. $5,300 C. $9,300 D. $9,800 $180,000/60,000 = $3.00 per DLH; $2,600 + 300($6.00) + 300($3.00) = $5,300 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #65 Learning Objective: 2 Learning Objective: 3 Topic Area: Computing the Cost of a Job
66.
What is the amount of direct materials purchased during June? A. $38,000 B. $40,000 C. $42,000 D. $43,000 $6,000 + materials purchased - $40,000 = $8,000; Materials purchased = $42,000 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #66 Learning Objective: 2 Learning Objective: 3 Topic Area: Computing the Cost of a Job
67.
What is the Cost of Goods Manufactured for June? A. $89,000
B. $84,000 C. $94,000 D. $99,000 $11,000 + CoGM - $16,000 = $84,000; CoGM = $89,000 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #67 Learning Objective: 2 Learning Objective: 3 Topic Area: Computing the Cost of a Job
68.
How much manufacturing overhead was applied to the Work-in-Process Inventory during June? A. $12,000 B. $15,600 C. $18,400 D. $20,500 $180,000/60,000 = $3.00 per DLH; $3.00 × 5,200 = $15,600 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Easy Lanen - Chapter 07 #68 Learning Objective: 3 Topic Area: Manufacturing Overhead
69.
What is the ending balance in the Direct Materials Inventory on June 30? A. $6,000 B. $10,500 C. $11,000 D. $15,000 $11,000 + CoGM - $16,000 = $84,000; CoGM = $89,000 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Hard Lanen - Chapter 07 #69 Learning Objective: 2 Learning Objective: 3 Topic Area: Computing the Cost of a Job
The financial records for the Lee Manufacturing Company have been destroyed in a fire. The following information has been obtained from a separate set of books maintained by the cost accountant. The cost accountant now asks for your assistance in computing the missing amounts.
Lanen - Chapter 07
70.
What is the amount of the materials purchased? A. $14,400 B. $16,400 C. $18,000 D. $19,600 $8,000 + purchases - $18,000 = $6,400; purchases = $16,400 AACSB: Analytic AICPA: FN-Measurement Blooms: Analysis Difficulty: Medium Lanen - Chapter 07 #70 Learning Objective: 2 Topic Area: Computing the Cost of a Job
71.
What is the value of the ending Work-in-Process inventory balance? A. $-0B. $4,200 C. $7,500 D. $8,000 $7,500 + $18,000 + $13,500 + $8,000 - $39,500 = $7,500 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #71 Learning Objective: 2 Topic Area: Computing the Cost of a Job
72.
What is the value of the beginning Finished Goods Inventory? A. $-0B. $4,200 C. $13,300 D. $21,700 beginning FGI + $39,500 - $57,000 = $4,200; beginning FGI = $21,700 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #72 Learning Objective: 2 Topic Area: Computing the Cost of a Job
73.
Birk Co. uses a job order costing system. The following debits (credits) appeared in Birk's work-inprocess account for the month of April:
Birk applies overhead to production at a predetermined rate of 80% of direct labor cost. Job No. 5, the only job still in process on April 30 has been charged with direct labor of $2,000. What was the amount of direct material charged to Job No.5? (CPA adapted) A. $3,000 B. $5,200 C. $8,800 D. $24,000 4,000+24,000+16,000+12,800 - 48,000 =8,800; 8,800 - 2,000 - 1,600= $5,200 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #73 Learning Objective: 3 Topic Area: Computing the Cost of a Job
74.
The following are Mill Co.'s production costs for October:
What amount of costs should be traced to specific products in the production process? (CPA adapted) A. $194,000 B. $190,000 C. $100,000 D. $90,000 DM (100,000) + DL (90,000) = $190,000 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Easy Lanen - Chapter 07 #74 Learning Objective: 2 Topic Area: Computing the Cost of a Job
75.
Under Pick Co.'s job order costing system manufacturing overhead is applied to work in process using a predetermined annual overhead rate. During January, Pick's transactions included the following:
Pick had neither beginning nor ending inventory in Work-in-Process Inventory. What was the cost of jobs completed in January? (CPA adapted) A. $302,000 B. $310,000 C. $322,000 D. $330,000 DM (90,000) + OH applied (113,000) + DL (107,000) = $310,000 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #75 Learning Objective: 2 Learning Objective: 3 Topic Area: Computing the Cost of a Job
76.
In a traditional job order costing system, the issue of indirect materials to a production department increases: (CPA adapted) A. Stores control. B. Work-in-Process control. C. Factory overhead control. D. Factory overhead applied. Indirect material is overhead—it increase factory overhead control. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Easy Lanen - Chapter 07 #76 Learning Objective: 3 Topic Area: Computing the Cost of a Job
77.
Which of the following actions do not cause an impropriety in job costing? A. Misstating the stage of completion. B. Choosing to use normal costing rather than actual costing. C. Charging costs to the wrong job. D. Choosing an allocation method based on the results rather than choosing the method based on resource usage. The choice between normal costing and actual costing is not an ethical issue. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #77 Learning Objective: 5 Topic Area: Ethical Issues and Job Costing
78.
Which of the following approaches allocates overhead by multiplying a predetermined overhead rate × actual activity? A. Actual costing B. Normal costing C. Regression costing D. Standard costing Normal costing still applies overhead based on actual activity; standard costing uses standard activity. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #78 Learning Objective: 3 Topic Area: Using Normal, Actual, and Standard Costing
79.
Which of the following approaches allocates overhead by multiplying an actual overhead rate × actual activity? A. Actual costing
B. Normal costing C. Regression costing D. Standard costing The actual rate is not known until the end of the period. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #79 Learning Objective: 3 Topic Area: Using Normal, Actual, and Standard Costing
80.
Which of the following approaches allocates overhead by multiplying a predetermined rate × standard activity? A. Actual costing B. Normal costing C. Regression costing D. Standard costing Normal costing still applies overhead based on actual activity; standard costing uses standard activity. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #80 Learning Objective: 3 Topic Area: Using Normal, Actual, and Standard Costing
81.
Scottso Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machine-hours were 19,050. How much overhead would be applied to production? A. $266,400. B. $274,320. C. $279,607. D. $287,920. $266,400/18,500 = $14.40/hr × 19,050 hr = $274,320 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #81 Learning Objective: 3 Topic Area: Using Normal, Actual, and Standard Costing
82.
Scottso Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machine-hours were 19,050. How much is the over- or underapplied overhead? A. $21,520 underapplied B. $13,600 underapplied C. $7,920 overapplied D. $0 $287,920 - [($266,400/18,500) × 19,050] = 13,600 underapplied AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #82 Learning Objective: 3 Topic Area: Using Normal, Actual, and Standard Costing
83.
Scottso Corporation applies overhead using an actual costing approach. Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machine-hours were 19,050. How much overhead would be applied to production? A. $266,400. B. $274,320. C. $279,607. D. $287,920. Actual costing applies the actual overhead incurred to production. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #83 Learning Objective: 3 Topic Area: Using Normal, Actual, and Standard Costing
84.
Scottso Corporation applies overhead using an actual costing approach. Budgeted factory overhead was $266,400, budgeted machine-hours were 18,500. Actual factory overhead was $287,920, actual machine-hours were 19,050. How much is the over- or underapplied overhead? A. $21,520 underapplied B. $13,600 underapplied C. $7,920 overapplied D. $0 There is no over- or underapplied overhead using actual costing. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #84 Learning Objective: 3 Topic Area: Using Normal, Actual, and Standard Costing
85.
Scottso Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $232,750, budgeted machine-hours were 17,500. Actual factory overhead was $227,830, actual machine-hours were 16,150. How much overhead would be applied to production? A. $214,795
B. $227,830 C. $232,750 D. $246,875 $232,750/17,500 = $13.30/hr × 16,150 hrs = $214,795 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #85 Learning Objective: 3 Topic Area: Using Normal, Actual, and Standard Costing
86.
Scottso Corporation applies overhead using a normal costing approach based upon machine-hours. Budgeted factory overhead was $232,750, budgeted machine-hours were 17,500. Actual factory overhead was $227,830, actual machine-hours were 16,150. How much is the over- or underapplied overhead? A. $13,035 overapplied B. $13,035 underapplied C. $4,920 overapplied D. $4,920 underapplied $227,830 - [($232,750/17,500) × 16,150] = 13,035 underapplied AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #86 Learning Objective: 3 Topic Area: Using Normal, Actual, and Standard Costing
87.
On October 1, the general ledger of Slipshod Company had the following accounts and balances:
The subsidiary ledgers had the following information on October 1:
During October, the following costs were incurred on account:
A summary of the materials requisition slips and the labor time tickets for the month revealed the following distribution:
Overhead is applied based upon direct labor cost. Jobs B81, B83, and B84 were for 8,000, 6,000 and 4,800 units of product respectively, and were completed during October. Jobs B80, B81, B82, and B83 were sold on account for $150,000. Required: Prepare T-accounts for a job order cost system, posting the beginning balances and all transactions for the month. Clearly indicate the ending balances for the accounts and label the 'cost of goods manufactured' and 'cost of goods sold' amounts.
Feedback: Overhead rate: B81: 8,750/7,000 = 125%
88.
The following selected data were taken from the records of the Bixby Box Company. The company uses a job costing system to account for its manufacturing costs. Bixby's fiscal year runs from January 1 to December 31; manufacturing overhead is closed out only at the end of the fiscal year. The following information relates to August operations. (1.) Jobs in process on August 1.
(2.) Jobs completed during August: W12, X13, Y14. (3.) Material requisitions and labor time tickets indicated the following:
(4.) Jobs sold during August: W12, X13. (5.) Bixby applies overhead to production based upon labor costs. (6.) Selected account balances on August 1 were:
(7.) Various overhead incurred (excluding indirect materials and indirect labor) during August, $13,500. (8.) Materials (direct and indirect) purchased during August, $10,9 05. Required: (a) What is the balance in the Material Inventory account on August 31? (b) Is the manufacturing overhead account over-or underapplied on August 31? By how much? (c) Compute the cost of goods manufactured for August. (d) Compute the cost of goods sold for August. (e) What is the balance of the Work-in-Process Inventory account on August 31? (a) $7,880 (b) underapplied by $1,900 (c) $27,835 (d) $16,530 (e) $7,020 Feedback: (a) $5,175 + 10,905 - (610 + 370 + 2,780 + 4,050 + 390) = ending balance = $7,880 (b) overhead in Work-in-Process Inventory, August 1: $9,555 - (800 + 1,000) - (1,200 + 1,620) = $4,935; overhead rate = $4,935/$2,820 = 175% of Direct Labor Costs MOH debits: IM $390 + IL 540 + incurred 13,500 = $14,430 MOH credits: Beg Bal 1,400 + applied 11,130 = $12,530 Ending MOH: $14,430 - 12,530 = $1,900 debit balance: underapplied
(d) W12 + X13: $6,800 + $9,730 = $16,530 (e) Job Z15: Material ($4,050) + Labor ($1,080) + Overhead ($1,890) = $7,020 AACSB: Analytic AICPA: FN-Measurement Blooms: Application
89.
Carver Test Systems manufactures automated test systems that perform quality inspections during and at the completion of the manufacturing process. As most manufacturing processes are unique, Carver's test equipment is designed to customer specifications, and each system has a selling price in excess of $300,000. The company uses a job-order cost system based on the full absorption of actual costs and applies overhead on the basis of machine hours using a predetermined overhead rate. For the fiscal year ended November 30 budgeted manufacturing overhead was $1,960,000, and the expected activity level was 98,000 machine hours. Data regarding several jobs at Carver are presented below. By the end of November all jobs but RX-115 were completed, and all completed jobs had been delivered to customers with the exception of SL-205.
Required:
(a) Determine the balance in the Finished Goods Inventory on November 30. (b) Compute the cost of goods manufactured for November. (c) Compute the Cost of Goods Sold for November. (d) Determine the balance in Work-In-Process Inventory on November 30. (a) $192,325 (b) $675,285 (c) $482,960 (d) $68,835 Feedback: Overhead rate = $1,960,000/98,000 hrs = $20/hr (a) only SL-205 is in inventory: $34,350 + 71,800 + 32,175 + (2,700 × $20) = $192,325 (b) XJ-107 + ST-211 + XD-108 + SL-205: $675,285 XJ-107: $118,600 + 4,000 + 8,400 + (150 × 20) = $134,000 ST-211: $121,450 + 2,500 + 12,160 + (300 × 20) = $142,110 XD-108: $21,800 + 86,400 + 36,650 + (3,100 × 20) = $206,850 SL-205: $34,350 + 71,800 + 32,175 + (2,700 × $20) = $192,325 (c) $675,285 - 192,325 = $482,960 (d) only RX-115: $18,990 + 21,845 + (1,400 × 20) = $68,835 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #89 Learning Objective: 2 Learning Objective: 3 Topic Area: Computing the Cost of a Job
90.
A manufacturing company employs job costing to account for its costs. There are three production departments, and separate departmental overhead application rates are employed because the operations of the departments are so different. All jobs generally pass through all three production departments. Data regarding the hourly direct labor rates, overhead application rates, and three jobs on which work was done during the month appear below. Job 101 and Job 102 were completed during the current month. (CIA Examination adapted)
Required:
(a) Compute the completed costs of Job 101 and Job 102. (b) Compute the value of the Work-in-Process Inventory at the end of the month. (a) Job 101: $147,075; Job 102: $144,950 (b) Job 103: $198,125
Feedback: AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #90 Learning Objective: 2 Learning Objective: 3 Topic Area: Computing the Cost of a Job
91.
Baby Care Manufacturing Company is a manufacturer of furnishings for infants and children. The company uses job costing and employs a full absorption accounting method for cost accumulation. Baby Care's Work-in-Process Inventory on April 30 consisted of the following jobs:
Baby Care applies manufacturing overhead on the basis of direct labor hours. The company's estimated manufacturing overhead for the period ending May 31 totals $4,500,000; the company estimated it would use 600,000 direct labor hours during the year. At the end of April, the balance in Baby Care's Materials Inventory, which includes both materials and purchased parts, was $668,000. Additions to, and requisitions from, the materials inventory during the month of May included the following:
During the month of May, Baby Care's factory payroll consisted of the following:
Listed below are the jobs that were completed and the units that were sold during the month of May.
Required:
(a) Compute the value of Baby Care's Work-in-Process Inventory on May 31. (b) Compute the value of Baby Care's Cost of Goods Manufactured for May. (a) Job DRS114: $807,750 (b) $2,471,650 Feedback: overhead rate: $4,500,000/600,000 hrs = $7.50/hr (a) WIP 5/31: Job DRS114: $250,000 beginning bal + $124,000 materials + $87,000 purchased parts + $200,500 labor + (19,500 × $7.50 overhead) = $807,750 (b) COGM: $1,267,400 CBS102 + $510,000 PLP086 + $199,250 STR077 + $495,000 CRG096 = $2,471,650 CBS102: $900,000 + 51,000 + 104,000 + 122,400 + (12,000 × 7.50) = $1,267,400 PLP086: $420,000 + 3,000 + 10,800 + 43,200 + (4,400 × 7.50) = $510,000 STR077: $-0- + 62,000 + 81,000 + 30,000 + (3,500 × 7.50) = $199,250 CRG096: $-0- + 65,000 + 187,000 + 138,000 + (14,000 × 7.50) = $495,000
92.
Shawano Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $266,400 and budgeted machine-hours were 18,500. Actual factory overhead was $287,920 and actual machine-hours were 19,050. Before disposition of over- or underapplied overhead, the cost of goods sold was $560,000 and ending inventories were as follows:
Required: a. Compute the amount of overhead applied to production. b. Prepare the journal entry to dispose of the over/under-applied overhead using the write-off to cost of goods sold approach. c. Prepare the journal entry to dispose of the over/under-applied overhead using the proration approach. (a) $274,320
Feedback: (a) rate = $266,400/18,500 = $14.40/hr; 19,050 hrs × $14.40 = $274,320 (b) actual - applied = $287,920 - 274,320 = $13,600 underapplied
AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #92 Learning Objective: 3 Topic Area: Manufacturing Overhead
93.
Prepare the necessary journal entries from the following information for Beaulieu Company. a. Purchased materials on account, $56,700. b. Requisitioned materials for production as follows: direct materials - 80 percent of purchases, indirect materials - 15 percent of purchases c. Direct labor for production is $33,100, indirect labor is $12,500. d. Overhead incurred (not including materials or overhead): $52,900. e. Overhead is applied to production based on direct labor cost at the rate of 220 percent. f. Goods costing $97,600 were completed during the period. g. Goods costing $51,320 were sold on account for $77,600. h. Close the overhead control account to Cost of Goods Sold.
Feedback: (h): Actual OH: $8,505 + 12,500 + 52,900 = 73,905 - Applied 72,820 = underapplied $1,085 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #93 Learning Objective: 2 Topic Area: Computing the Cost of a Job
94.
Danner Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $375,000 and budgeted machine-hours were 12,500. Actual factory overhead was $387,920 and actual machine-hours were 13,150. Required: a. Compute the overhead application rate. b. Compute the amount of overhead applied to production. c. Determine the amount of over- or underapplied overhead. (a) $30 per machine hour (b) $394,500 (c) $6,580 overapplied Feedback: (a) rate = $375,000/12,500 hrs = $30/hr (b) 13,150 × $30 = $394,500 (c) $387,920 actual - 394,500 applied = $6,580 overapplied AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #94 Learning Objective: 3 Topic Area: Manufacturing Overhead
95.
The following selected data were taken from the books of the Bixby Box Company. The company uses job costing to account for manufacturing costs. The data relate to June operations. A) Materials and supplies were requisitioned from the stores clerk as follows: Job 405, material X, $7,000. Job 406, material X, $3,000; material Y, $6,000. Job 407, material X, $7,000; material Y, $3,200. For general factory use: materials A, B, and C, $2,300. B) Time tickets for the month were chargeable as follows:
C) Other information: Beginning work-in-process, June 1, $-0Factory paychecks for $36,700 were issued during the month. Various factory overhead charges of $19,400 were incurred on account. Depreciation of factory equipment for the month was $5,400. Factory overhead was applied to jobs at the rate of $35.00 per direct labor hour. Job orders completed during the month: Job 405 and Job 406. Selling and administrative costs were $2,100. Factory overhead is closed out only at the end of the year. Required: (a) Determine the ending work-in-process balance on June 30. (b) Determine the cost of goods manufactured for June. (c) Is factory overhead over- or underapplied for June? What is the monthly value? (a) $24,850 (b) $64,100 (c) $1,050 underapplied Feedback: (a) Job 407: $7,000 + 3,200 + 8,000 + (190 × $35) = $24,850 (b) Jobs 405 & 406: $28,500 + 35,600 = $64,100 Job 405: $7,000 + 11,000 + (300 × $35) = $28,500 Job 406: $3,000 + 6,000 + 14,000 + (360 × $35) = $35,600 (c) Actual OH: $2,300 + 3,700 + 19,400 + 5,400 = $30,800; Applied: (300 + 360 + 190) × 35 = $29,750; $30,800 - 29,750 = $1,050 underapplied AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #95 Learning Objective: 2 Topic Area: Computing the Cost of a Job
96.
Rosebud Manufacturing uses actual costing. The following events took place during the current year: (1) Purchased $95,000 in direct materials. (2) Incurred labor costs as follows: (a) direct, $56,000 an d (b) indirect, $13,600. (3) Other manufacturing overhead was $107,000, excluding indirect labor. (4) Transferred 80% of the materials to the manufacturing a ssembly line. (5) Completed 65% of the Work-in-Process during the year. (6) Sold 85% of the completed goods. (7) There were no beginning inventories. Required: (a) Determine the ending Direct Materials Inventory balance. (b) Determine the ending Work-in-Process Inventory balance. (c) Determine the ending Finished Goods Inventory balance. (d) Determine the Cost of Goods Manufactured. (a) $19,000 (b) $88,410 (c) $24,628.50 (d) $164,190 Feedback: (a) $-0- + 95,000 - (95,000 × 80%) = $19,000 (b) costs added: (95,000 × 80%) + $56,000 + (107,000 + 13,600) = $252,600; WIP: $-0- + 252,600 (252,600 × 65%) = $88,410 (c) $-0- + 164,190 - (164,190 × 85%) = $24,628.50 (d) $252,600 × 65% = $164,190 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #96 Learning Objective: 2 Learning Objective: 3 Topic Area: Computing the Cost of a Job
97.
The Cedar Company does not maintain backup documents for its computer files. In June, some of the current data were lost, and you have been asked to help reconstruct the data. The following beginning balances are known:
Reviewing old documents and interviewing selected employees have generated the following additional information: The production superintendent's job cost sheets indicated that materials of $5,200 were included in the June 30 Work-in-Process Inventory. Also, 300 direct labor hours had been paid at $12.00 per hour for the jobs in process on June 30. The Accounts Payable account is only for direct material purchases. The clerk remembers clearly that the balance in the Accounts Payable on June 30 was $16,000. An analysis of canceled checks indicated payments of $80,000 were made to suppliers during June. Payroll records indicate that 5,200 direct labor hours were recorded for June. It was verified that there were no variations in pay rates among employees during June. Records at the warehouse indicate that the Finished Goods Inventory totaled $32,000 on June 30. Another record kept manually indicates that the Cost of Goods Sold in June totaled $168,000. The predetermined overhead rate was based on an estimated 60,000 direct labor hours for the year and an estimated $360,000 in manufacturing overhead costs. Required: (a) Compute the Cost of Goods Manufactured. (b) Compute the ending Work-in-process inventory balance. (c) Compute the ending Direct Materials Inventory balance. (a) $178,000 (b) $10,600 (c) $22,000 Feedback: Overhead rate = $360,000/60,000 = $6/hr (a) Beg. FG: $22,000 + COGM - COGS 168,000 = End. FG 32,000; COGM = $178,000 (b) Ending WIP: Materials $5,200 + (300 × $12) + (300 × $6) = $10,600 (c) WIP: 9,000 + DM used + (5,200 × $12) + (5,200 × $6) -$178,000 = $10,600: DM used = $86,000; AP: $12,000 + purchased - 80,000 = $16,000: Purchased = $84,000; DM $24,000 + 84,000 - 86,000 = $22,000 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #97 Learning Objective: 2 Learning Objective: 3 Topic Area: Computing the Cost of a Job
98.
The financial records for the Lee Manufacturing Company have been destroyed in a flood. The following information has been obtained from a separate set of books maintained by the cost accountant. The cost accountant now asks for your assistance in computing the missing amounts.
Required: Compute the following: (a) direct materials purchased (b) ending Work-in-process inventory (c) beginning Finished goods inventory (a) $16,400 (b) $7,500 (c) $21,700 Feedback: (a) $8,000 + purchased - $18,000 = $6,400; purchases = $16,400 (b) $7,500 + 18,000 + 13,500 + 8,000 - 39,500 = $7,500 (c) BFG + 39,500 - 57,000 = $4,200; beginning FG = $21,700 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #98 Learning Objective: 2 Topic Area: Computing the Cost of a Job
99.
The Bisson Company had the following transactions and events during its first year of operations. Estimated overhead for the year was $770,000; estimated direct labor cost for the year was $350,000. a. Purchased materials on account, $567,000. b. Requisitioned materials for production as follows: direct materials - 85 percent of purchases, indirect materials - 12 percent of purchases c. Direct labor for production is $331,000, indirect labor is $125,000. d. Overhead incurred (not including materials or labor): $529,000. e. Overhead is applied to production based on direct labor cost at the rate of ___ percent. f. Goods costing $976,000 were completed during the period. g. Goods costing $513,200 were sold on account for $776,000. Required: Determine the ending balances for: (a) Materials inventory (b) Work-in-process inventory (c) Finished goods inventory (a) $17,010 (b) $565,150 (c) $462,800 Feedback: overhead rate = $770,000/$350,000 = 220% (a) $-0- + $567,000 - (567,000 × 85%) - (567,000 × 12%) = $17,010 (b) $-0- + (567,000 × 85%) + 331,000 + (331,000 × 220%) - 976,000 = $565,150 (c) $-0- + 976,000 - 513,200 = $462,800 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #99 Learning Objective: 2 Topic Area: Computing the Cost of a Job
100.
The Brisebois Company had the following transactions and events during its first year of operations. Estimated overhead for the year was $770,000; estimated direct labor cost for the year was $350,000. a. Purchased materials on account, $567,000. b. Requisitioned materials for production as follows: direct materials - 85 percent of purchases, indirect materials - 12 percent of purchases c. Direct labor for production is $331,000, indirect labor is $125,000. d. Overhead incurred (not including materials or labor): $529,000. e. Overhead is applied to production based on direct labor cost at the rate of ___ percent. f. Goods costing $976,000 were completed during the period. g. Goods costing $513,200 were sold on account for $776,000. Required: (1) Prepare the journal entries to record the transactions for the year. (2) Prepare the journal entry to prorate the over- or underapplied overhead to the appropriate accounts.
Feedback: (1d) overhead rate: $770,000/$350,000 = 220% (2): Actual OH: $68,040 + 125,000 + 529,000 = 722,040 - Applied 728,200 = overapplied $6,160 WIP: $-0- + (567,000 × 85%) + 331,000 + (331,000 × 220%) - 976,000 = $565,150 FG: $-0- + 976,000 - 513,200 = $462,800
AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #100 Learning Objective: 2 Topic Area: Computing the Cost of a Job
101.
In February, Forester Engineering worked on three contracts: 1,200 hours for Tarvell Company, 1,100 hours for Natron LLC and 3,400 for Lisere Corp. Forester bills clients at the rate of $1 50 per hour; labor cost for its engineering staff is $45 per hour. The total number of hours worked in February was 6,000 (any untraced hours are considered overhead), and non-labor overhead costs were $325,000. Overhead is applied to clients at $55 per labor-hour. In addition, Forester had $243,000 in marketing and administrative costs. All transactions are on account. All services were billed. Required: a. Determine the cost of each of the three jobs. b. What is the amount of over- or underapplied overhead? c. How much operating profit did Forester make in February? Assume the over- or underapplied overhead is not closed out each month. (a) Tarvell: $120,000; Natron: $110,000; Lisere: $340,000 (b) $25,000 underapplied (c) $42,000
Feedback: (b) Indirect labor: 6,000 hrs × $45 = $270,000 - 256,500 = $13,500; overhead = $13,500 + 325,000 = $338,500. Underapplied: $313,500 applied - 338,500 incurred: $25,000 underapplied
AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #101 Learning Objective: 4 Topic Area: Using Job Costing in Service Organizations
102.
Mounder Manufacturing Company employs job costing to account for its costs. There are three production departments, and separate departmental overhead application rates are employed. All jobs generally pass through all three production departments. Data regarding the hourly direct labor rates, overhead application rates, and three jobs on which work was done during the month appear below. Job 611 and Job 613 were completed during the current month, Job 612 was still in process. (CIA Examination adapted)
Required:
(a) Compute the completed costs of Job 611 and Job 613. (b) Compute the value of the Work-in-Process Inventory at the end of the month. (a) Job 611: $215,060; Job 613: $323,400 (b) Job 612: $154,120
Feedback: AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #102 Learning Objective: 2 Learning Objective: 3 Topic Area: Computing the Cost of a Job
103.
Misa Company applies overhead based upon labor-hours. Budgeted factory overhead was $910,000 and budgeted labor-hours were 32,500. Actual factory overhead was $893,675 and actual labor-hours were 31,560. Required: a. Compute the overhead application rate. b. Compute the amount of overhead applied to production. c. Determine the amount of over- or underapplied overhead. (a) $28 per labor hour (b) $883,680 (c) $9,995 underapplied Feedback: (a) rate = $910,000/32,500 hrs = $28/hr (b) 31,560 × $28 = $883,680 (c) $893,675 actual - 883,680 applied = $9,995 underapplied AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #103 Learning Objective: 3 Topic Area: Manufacturing Overhead
104.
Becker Company applies overhead at a rate of $26 per direct labor hour. Budgeted labor hours were 25,000; actual labor hours exceeded the budget by 1,600 hours. Overhead was overapplied by $3,758. Required: (a) Compute the budgeted overhead for the year. (b) Compute actual overhead for the year. (a) $650,000 (b)$687,842 Feedback: (a) 25,000 hrs × $26/hr = $650,000 (b) applied OH = (25,000 + 1,600) × $26 = $691,600; applied - overapplied = actual OH: $691,600 3,758 = $687,842 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #104 Learning Objective: 3 Topic Area: Manufacturing Overhead
105.
Bailey's Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $325,000 and budgeted machine-hours were 13,000. Actual factory overhead was $312,330 and actual machine-hours were 12,660. Before disposition of over- or underapplied overhead, the cost of goods sold was $725,000 and ending inventories were as follows:
Required: a. Compute the amount of overhead applied to production. b. Prepare the journal entry to dispose of the over/under-applied overhead using the write-off to cost of goods sold approach. c. Prepare the journal entry to dispose of the over/under-applied overhead using the proration approach. (a) $316,500
Feedback: (a) rate = $325,000/13,000 = $25/hr; 12,660 hrs × $25 = $316,500 (b) actual - applied = $312,330 - 316,500 = $4,170 overapplied
AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #105 Learning Objective: 3 Topic Area: Manufacturing Overhead
106.
The Perrot Company is a computer repair shop and had the following transactions and events during the year. Estimated overhead for the year was $175,000; estimated labor for the year was 6,000 hours. a. Purchased materials on account, $126,000. b. Traced materials to repair jobs $110,880; general shop materials used $9,500. c. Labor traced to repair jobs $165,000, untraced labor was $22,200. d. Overhead incurred (not including materials or labor): $139,600. e. Overhead is applied to repair jobs based on labor hours. All workers were paid $30/hr. f. Ending work-in-process consisted of one repair job with a cost of $1,976. There was no beginning work-in-process. g. Repair jobs were billed to the customers for $476,000. Required: (1) Prepare the journal entries to record the transactions for the year. (2) Prepare the journal entry to write-off the over- or underapplied overhead to the cost of repair jobs. (3) What would Perrot's operating profit for the year?
Feedback: (1d) overhead rate: $175,000/6,000 hrs = 29.1667/hr (1f)WIP: $-0- + 110,880 + 165,000 + (5,500 × 29.1667) - 1,976 = $434,321 (2): Actual OH: $9,500 + 22,200 + 139,600 = 171,300 - Applied 160,417 = underapplied $10,883 (3) $476,000 - (434,321 + 10,883) = $30,796 AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #106 Learning Objective: 4 Topic Area: Using Job Costing in Service Organizations
107.
Why might a company use a predetermined rate for applying overhead rather than just apply actual overhead? Students may provide a number of reasons, including: 1) costs can be computed for a job immediately upon completion, 2) random factors such as large expenses may not enter the cost of a job, 3) seasonal swings in production will not cause jobs to cost differently at different times of the year. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Medium Lanen - Chapter 07 #107 Learning Objective: 3 Topic Area: Predetermined Rate
108.
Describe the difference between normal costing, actual costing, and standard costing. Normal costing assigns actual direct costs to a job and applies overhead based on a predetermined rate times the actual activity. Actual costing assigns actual direct costs to a job and actual overhead as well. Standard costing assigns a standard amount of direct costs to a job and applies overhead using a standard rate times standard activity. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Medium Lanen - Chapter 07 #108 Learning Objective: 3 Topic Area: Using Normal, Actual, and Standard Costing
109.
How does job costing for a service organization differ from job costing for a manufacturer? The only real difference beside different account titles is a service organization has fewer direct materials than a manufacturer. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Medium Lanen - Chapter 07 #109 Learning Objective: 4 Topic Area: Using Job Costing in Service Organizations
110.
Describe three possible unethical actions that can cause impropriety in job costing. 1) Misstating the stage of completion; 2) charging costs to wrong jobs; 3) misrepresenting the cost of jobs. Feedback: Students should expand on each of these three. AACSB: Analytic AICPA: FN-Measurement Blooms: Application Difficulty: Medium Lanen - Chapter 07 #110 Learning Objective: 5 Topic Area: Ethical Issues and Job Costing
111.
Describe two alternative approaches to the handling of over- or underapplied overhead. 1) The over- or underapplied overhead can be written off directly to cost of goods sold; 2) the o ver- or underapplied overhead can be prorated between work-in-process, finished goods, and cost of goods sold. AACSB: Analytic AICPA: FN-Measurement Blooms: Comprehension Difficulty: Medium Lanen - Chapter 07 #111 Learning Objective: 3 Topic Area: Over- and Underapplied Overhead