Solution manual cost and managerial accounting 3rd by barfield job order costing
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Chapter 5
Job Order Costing
Questions
1.
Such a company should not aggregate costs across customer
orders because such a process could charge excessively high
(or low) costs to orders that did not create those costs.
Only by separating the costs by customers will a reliable
basis be provided for determining job prices and evaluating
job profitability.
2.
A company should use job order costing only when it is
necessary and possible to trace costs to products made for
individual customers, and when the products made for one
customer are very different from those made for other
customers. In such a setting, no meaningful average cost
exists across customers that could be used for important
decisions such as setting prices.
3.
The diametric alternative to the job order costing system is
the process costing system. A process costing system is
appropriate for those production environments that make
homogeneous products, usually in large quantities, in batch or
continuous flow systems.
4.
The three valuation methods are actual, normal, and standard
costing. In actual costing, only the actual amounts of
materials, labor, and overhead costs are assigned to
production. Normal costing differs from actual costing in
that an amount of overhead is applied to products using a
predetermined overhead rate rather than the actual amount.
Standard costing differs from actual and normal costing in
that a perunit amount (standard) is established for direct
material, direct labor, and manufacturing overhead. These
predetermined amounts are charged to production rather than
the actual or normal costs.
5.
A job is a unit of work and may contain one or many product
units. In a job order costing system it is necessary to
specify each job because the job is the cost object and costs
are separately accumulated for each job.
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104
6.
The three stages for a job are started but not completed,
completed but not sold, and sold. Cost information for
completed jobs is used to evaluate the profitability of
individual jobs, to serve as a basis for bidding future jobs,
and to determine the cost of goods sold.
7.
The principal documents are the material requisition forms,
employee time sheets, and job order cost sheets. Material
requisition forms are used to initiate the removal of raw
materials from inventory or to acquire them from suppliers.
Time sheets are used to track the time of individual employees
to specific jobs. Job cost sheet are used to track the costs
of direct materials, direct labor, and manufacturing overhead
associated with particular jobs, and possibly compare those
costs with budgeted costs.
8.
The material requisition form is important because it
establishes who authorized the purchase or use of raw
materials and in what amounts. It therefore establishes the
custody of materials through time and production.
9.
A job order cost sheet is a detailed subsidiary ledger
account. As such, it is the major accounting document used in
a job order costing system. It typically contains information
such as the customer identification; job description;
starting, completion, and delivery dates; budgeted and actual
costs; and contract price. Collectively, the job cost sheets
serve as the subsidiary records for Work in Process Inventory,
Finished Goods Inventory, and Cost of Goods Sold accounts.
10.
Job cost sheets provide managers with information about the
costs that have been assigned to particular jobs. Some job
cost sheets record both the budgeted and actual costs incurred
on each specific job. The actual cost information can then be
reflected in the various inventory accounts as well as cost of
goods sold. Such cost information can be broken down into
perunit costs on jobs consisting of multiple, similar
outputs. This cost aggregation may prove useful for planning
and control purposes as well as for bidding on future
contracts.
11.
This statement is false. The job cost record is merely a
subsidiary ledger account and, thus, serves as a backup to the
general ledger control account. Therefore, any information
that is recorded in the job cost record must also be recorded
in the general ledger control account (Work in Process
Inventory) to reconcile the control and subsidiary
information. The postings to the general ledger control
accounts and the subsidiary ledger may be made at different
points in time.
Chapter 5
Job Order Costing
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Chapter 5
Job Order Costing
106
12.
An employee time sheet would show all hours worked, including
overtime, by a given employee for a pay period. The time
sheet is used to assign the cost of employee labor to
specific jobs. Generally, however, overtime premiums will not
be charged to specific jobs although the overtime hours worked
will be charged to the jobs at regular hourly rates.
13.
A predetermined overhead rate is generally better than an
actual rate for several reasons. First, the actual amount of
overhead incurred during one period cannot be known until well
into the next period when all accruals and adjusting entries
have been made; therefore, actual overhead could not be
assigned to jobs until this information is known. Secondly,
the numerator (actual overhead) or the denominator (activity
level) could include distortions due to seasonal fluctuations,
causing assigned costs to be abnormal. Last, changes in
actual overhead costs in different months can be smoothed
using an expected annual measure of costs and activity
14.
Under or overapplied overhead will result when the estimates
used in determining the predetermined overhead rate are
different from the actual amount of overhead incurred or
levels of activity performed, or both. If applied overhead is
less than actual overhead, the difference is called
underapplied overhead; if it is greater than actual, the
difference is called overapplied overhead. In general, the
differences should be small and the resulting under or
overapplied overhead should be immaterial.
15.
The most significant difference between service and
manufacturing firms is that the service firms cannot inventory
services in the same manner that manufacturing firms can
inventory products. Accordingly, job order costing plays a
much less important role in service firms in valuing
inventory, but may play an extremely important role in
determining cost per job and customer profitability.
16.
The cost of goods sold is determined as the sum of costs for
all jobs that have been sold during a period. In most
businesses, this amount would be very close to the cost of
goods manufactured because firms that use job costing produce
to the orders of customers rather than to create inventory.
17.
Advancing technology is allowing companies to track more costs
and other information about jobs. One of the most exciting
developments are intranets that allow companies to post
information, including cost data, in a central repository that
can be accessed simultaneously by all managers who require
such information to execute their job assignments. Further,
the information available is increasingly realtime data.
Chapter 5
Job Order Costing
107
18.
Student will have different answers. No solution provided.
19.
Under a job order costing system based on actual costs,
entries to record costs to the control account Work in Process
Inventory and the subsidiary job cost records are made for the
actual amounts of materials, labor, and overhead used. In a
standard cost job order system, norms are developed for
materials, labor and overhead and it is these norms which are
carried in the Work in Process Inventory and job order
records. The standards or norms for materials and labor can
be for quantities, prices, or both. The differences between
actual and standard charges to WIP are called variances and
will be computed as production gets under way.
A company would use a standard cost job order system to
enable management to determine the efficiency with which jobs
were performed. Standard costing with regard to quantity
would only be useful in a production environment that
generated some type of uniform output that would allow
standards or norms to be developed.
20.
No. Only if a firm has an opportunity to routinely make a
product will standard costs be very useful. For oneofakind
products, there is simply no opportunity to develop reliable
standards and no opportunity to learn from past experiences
about ways to become more efficient in operations.
21.
Variances identify the areas of efficiency and inefficiency in
production operations. Managers, using the philosophy of
management by exception, focus their attention on the
significant variances. They attempt to determine causes of
both significant favorable and unfavorable variances and will
specifically look for interactions among the variances. By
concentrating on the significant variances, managers focus on
the aspects of operations that are out of control and try to
correct the causes.
22.
Job order costing facilitates a disaggregated analysis of
costs. Rather than analyzing, for example, cost of goods
sold, a manager can analyze the cost of specific jobs. This
more detailed information allows managers to obtain insights
that otherwise would be beyond their reach. For example,
managers can examine important data such as job profitability,
job pricing, cost control on a jobbyjob basis, job
production schedules, and actual versus budgeted job costs.
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Job Order Costing
Exercises
23.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
job order
process
job order
job order
job order
process
job order
process
job order
job order
24.
a.
Raw Materials Inventory
Accounts Payable
87,000
Work in Process Inventory
Raw Materials Inventory
81,900
81,900
Work in Process Inventory
Cash (1,700 × $18)
30,600
30,600
87,000
Manufacturing Overhead
41,100
Cash ($9,000 + $3,600 + $4,750) 17,350
Accumulated Depreciation
17,500
Supplies Inventory
6,250
Work in Process Inventory
42,500
Manufacturing Overhead (1,700 × $25)
b.
42,500
Raw Material = $2,150 + $87,000 $81,900 = $7,250
Work in Process = $2,350 (given)
c.
Cost of Goods Manufactured = Beginning Work in Process +
Current period costs – Ending Work in Process
= $11,150 + $81,900 + $30,600 + $42,500 $2,350
= $163,800
Unit cost = $163,800 ÷ 5,000 = $32.76
d.
Applied overhead – Actual overhead = $42,500 $41,100
= $1,400 overapplied
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25.
a.
Direct Materials Inventory
Accounts Payable
19,000
WIP Job #217
WIP Job #218
WIP other jobs
Direct Materials Inventory
11,200
1,800
13,400
WIP Job #217
WIP Job #218
WIP other jobs
Cash/Wages Payable
2,600
3,500
4,900
Manufacturing Overhead
Various accounts
18,900
19,000
26,400
11,000
18,900
WIP Job #217 (2,600 × $1.72) 4,472
WIP Job #218 (3,500 × $1.72)
6,020
WIP other jobs (4,900 × $1.72) 8,428
Manufacturing Overhead
(Actual rate per
DL$ = $18,900 $11,000 = $1.72 per DL$
Finished Goods Inventory
WIP Inventory Job #217
($2,800 + $11,200 + $2,600 +
$4,472 = $21,072)
21,072
Cash
29,501
21,072
Sales
($21,072 × 140% = $29,501)
Cost of Goods Sold
Finished Goods Inventory
b.
18,920
29,501
21,072
21,072
Ending balance in WIP = Cost of job #218 + Cost of other
jobs = ($1,400 + $1,800 + $3,500 + $6,020) + ($13,400
$4,900 + $8,428) = $12,720 + $26,728 = $39,448
Ending balance in Job #218 = $12,720
26.
a.
OH rate = $345,600 ÷ $384,000 = 90% of direct labor
b.
Ending WIP Balance:
DM $132,600
DL 93,600
MOH (0.9 × 93,600) 84,240
Ending balance $310,440
Cost of goods completed = $554,400 + $384,000 + $345,600
Chapter 5
Job Order Costing
$310,440 = $973,560
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27.
a.
$120,000 + $30,800 + $108,500 = $259,300
b.
Overhead rate = $1,200,000 ÷ 40,000 = $30 per MH
$120,000 + $30,800 + ($30 × 3,400)
= $120,000 + $30,800 + $102,000 = $252,800
c.
The only factor driving the difference is manufacturing
overhead. Under actual costing, $108,500 of overhead is
assigned to production; under normal costing, $102,000 of
overhead is assigned to production ($30 per MH × 3,400
MHs).
a.
CGS is the amount credited to Finished Goods Inventory
for the year = $342,500.
b.
Beg. FG + CGM – End. FG = CGS
CGM = CGS + End. FG – Beg. FG
= $342,500 + $21,000 $22,500
= $341,000
c.
Beg. WIP + DM + DL + OH – End. WIP = CGM
DM = CGM Beg. WIP DL OH + End. WIP
= $341,000 $14,000 $45,000 ($45,000 × 1.2) +
$12,000
= $240,000
28.
111
d.
Applied overhead = $45,000 × 1.20
= $54,000
29.
e.
Beg. DM + Purchases Usage = End. DM
$6,150 + Purchases $240,000 = $2,050
Purchases = $235,900
a.
Mixing Dept. = $60,000 ÷ 7,500 = $8 per MH
Paving Dept. = $98,000 ÷ 3,500 = $28 per DLH
b. Mixing Dept. 80 MHs. × $ 8 = $ 640
Paving Dept. 60 DLHs. × $28 = 1,680
Total overhead applied
$2,320
c.
No, because the amounts of overhead in each department
are extremely varied as are the number of machine and
direct labor hours worked in each department.
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30.
a.
Secretary ($1,800 ÷ 160 hrs. = $11.25;
$11.25 × 14 hrs.) $ 157.50
Copies (126 pages × $0.04 per page) 5.04
Phone calls 165.50
Overhead ($7,200÷120 hrs. = $60; $60 × 85 hrs.) 5,100.00
Attorney's time ($40 × 85 hrs.) 3,400.00
Total charges $8,828.04
This means Gunn would be charging, $8,828.04 ÷ 85 =
$103.86 per hour.
b.
Direct costs ($5.04 + $165.50 + $3,400.00) $ 3,570.54
Allocated secretarial costs 157.50
Allocated overhead 5,100.00
Margin ($40 + $60) × 0.50 × 85 4,250.00
Total billing $13,078.04
31. a.
24,900 × $23.20* = $577,680 OH applied to WIP
*
$556,800 ÷ 24,000 MHs = $23.20 per MH
32.
b.
Budgeted overhead – Actual overhead = Over/Underapplied
$577,680 $562,600 = $15,080 overapplied
c.
750 × $23.20 = $17,400
d.
If the $15,080 overapplication is judged immaterial, it
is deducted from Cost of Goods Sold. If judged material,
it is prorated to the Work in Process, Finished Goods,
and Cost of Goods Sold accounts according to the relative
magnitude of the ending balances of those accounts.
a.
Work in Process Inventory
Manufacturing Overhead
(30,100 × $2.20 = $66,200)
66,220
66,220
b.
$2.20 × 13,900 = $30,580
c.
Beginning balance
Direct materials
Direct labor
Applied overhead
Ending balance
d.
Overhead rate = Budgeted OH ÷ Budgeted DL cost
$2.20 = $660,000 ÷ Budgeted DL cost
$660,000 ÷ $2.20 = Budgeted DL cost
$300,000 = Budgeted DL cost
$14,350
24,800
13,900
30,580
$83,630
Overhead rate = $660,000 ÷ $300,000 = $2.20
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33.
a.
Overhead rate = $1,440 ÷ $2,400 = $0.60 per DL$
Direct material
$6,700
Direct labor
1,300
Applied overhead ($1,300 × $0.60) 780
Total cost
$8,780
b.
BI of WIP ($16,500 + $2,400 + $1,440)
Direct material
Direct labor
Applied overhead ($12,600 × $0.60)
EI of WIP (Job #920)
Cost of goods manufactured
34.
$20,340
$34,700
12,600
7,560 54,860
$75,200
(8,780)
$66,420
c.
Actual overhead
Applied overhead
Underapplied OH
$ 8,700
(7,560)
$ 1,140
a.
Brangston: $1,800 ÷ $45 = 40 DLHs worked
Westside: $9,450 ÷ $45 = 210 DLHs worked
Randall: $20,250 ÷ $45 = 450 DLHs worked
Brangston: 40 DLHs × $55 = $2,200 OH applied
Westside: 210 DLHs × $55 = $11,550 OH applied
Randall: 450 DLHs × $55 = $24,750 OH applied
Direct material
Direct labor
Overhead
Total cost
Brangston Westside
$4,500 $ 8,100
1,800
9,450
2,200 11,550
$8,500 $29,100
Randall
$ 9,600
20,250
24,750
$54,600
b.
Brangston: $8,500 ÷ 5 = $1,700
Westside: $29,100 ÷ 10 = $2,910
Randall: $54,600 ÷ 15 = $3,640
c.
Actual OH – Applied OH = $40,000 $38,500 = $1,500
underapplied OH (to be assigned to CGS)
Sales (30 ads X $4,600)
$138,000
Costs:
Direct material
$22,200
Direct labor
31,500
Applied overhead
38,500
Underapplied overhead
1,500 (93,700)
Net income
$ 44,300
Chapter 5
Job Order Costing
d.
Ads shouldn't be billed at a flat rate because some may
take much longer to develop than others. For example,
the ads for Randall took 450 hours to develop a mere 15
ads (30 hours each). Ten ads were developed for Westside
in only 210 hours (21 hours each). Finally, 40 hours were
consumed to develop 5 ads for Brangston (8 hours each).
If Tom wishes to quote a flat rate, he should be billing
based on a standard charge per direct labor hour rather
than a standard charge per ad.
35.
Material price variance
AP × AQp SP × AQp
$0.015 × 480,000 $0.017 × 480,000
$7,200 $8,160
| |
| |
| $ 960 F |
Material quantity variance
SP × AQu SP × SQ
$0.017 × 480,000 $0.017 × 460,000
$8,160 $7,820
| |
| |
| $340 U |
where:
AP is actual price paid per sheet,
SP is standard price per sheet,
AQ is actual quantity, and
SQ is standard quantity.
36.
a.
114
45,500 × $9.25 = $420,875
b.
Labor Rate Variance
AP × AQ SP × AQ
$9.25 × 45,500 $9.75 × 45,500
$420,875 $443,625
| |
| |
| $22,750 F |
c.
Labor Efficiency Variance
SP × AQ SP × SQ
$9.75 × 45,500 $9.75 × 44,200
$443,625 $430,950
| |
| |
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Chapter 5
Job Order Costing
| $12,675 U |
37.
a.
Work in Process Inventory
8,000
Direct Material Inventory 8,000
(800 units × $10 per unit)
b.
Total cost:
Direct material
Direct labor (800 × $18)
Overhead (800 × $15)
Total
c.
$ 8,000
14,400
12,000
$34,400
Finished Goods Inventory
34,400
Work in Process Inventory
34,400
Accounts Receivable
Sales
44,300
44,300
Cost of Goods Sold
34,400
Finished Goods Inventory
34,400
38.
The student’s memo should address the following issues.
The biggest problem is that the budgeted cost is well
below the actual cost for each job. This indicates that the
company is not using its information on past jobs as a basis
for either lowering costs or increasing future bid prices. By
not using the available historical information to adjust
operations, the company is accepting jobs that are very
marginal. Although each job generated a positive gross
margin, the actual gross margin is only a small fraction of
the budgeted gross margin. The company must use historical
costs as a basis to find ways to improve future costs and/or
adjust future bids.
Chapter 5
Job Order Costing
116
39.
The student’s report should contain some of the following
issues.
Mass production of frozen meals coupled with name brand
recognition would be a reasonable strategy for the U.S.
market. This strategy would allow the firm to generate a high
volume of production and would lend itself to the use of
automated technology. However, in Mexico the firm would try
to compete by producing frozen meals in very small operations
and tailor the product to the demands of the local market.
The keys to success would be to successfully identify the
unique demands of the local market and concentrate operations
in those local markets that generate sufficient volume to make
operations profitable.
There would possibly be a difference in accounting
systems used in each country. Certainly, the U.S. operation
would be suitable for the use of process costing—high volume,
homogeneous output. The small Mexican shops might use either
process costing or job order costing. Job order costing would
be appropriate if each shop produced customized frozen meals
for major customers. Process costing would be appropriate if
only a single type of frozen meal was produced for the local
market in each shop.
40.
The student’s report should include some of the following
issues.
In using accounting data to measure earnings, the
objective is the timely matching of costs with the related
revenues. Deferring costs until future periods inflates the
level of net income that would otherwise be reported. If
improper, the deferral would have the effect of making a
company appear to be more profitable than it actually is. In
future periods, the company would be forced to report the
deferred costs and its reported level of net income would fall
(if, in fact, there is no deferred benefit). As an investor,
the issue that must be resolved is whether there is a future
benefit associated with the costs that have been deferred. If
so, the measure of current income may be a useful measure of
economic earnings. Otherwise, economic earnings are much
lower than the reported earnings and the firm’s valuation
should be adjusted accordingly.
41.
a.
Joint ventures and other cooperative arrangements require
accountants to develop systems that cannot only account
for costs that are generated within a given firm, but to
also account for costs that are incurred in the joint
ventures and other entities. In addition to the
bookkeeping challenge, accountants must be able to
provide managers with information about where to source
conversion activities (in house or otherwise) so that
competitive bids can be made and costs can be effectively
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Chapter 5
Job Order Costing
managed.
b.
Historically, accounting systems have been inwardly
focused on financial information of single firms.
Increasingly in the future, accounting systems must be
adapted and developed to look outwardly as well as
inwardly. Joint ventures are very common for job shop
environments. In these situations, managers must have
the information and tools to wisely determine what
conversion activities should be done inhouse and which
should be accomplished by another firm. To obtain the
overall lowest bid and win contracts, firms must exploit
both their own core competencies and those of other
firms, including competitors.
Problems
42.
Raw Material Inventory
Accounts Payable
390,000
Work in Process Inventory
Raw Material Inventory
370,000
Manufacturing Overhead
Raw Material Inventory
60,000
Work in Process Inventory
Manufacturing Overhead
Wages Payable
474,000
120,000
390,000
370,000
60,000
594,000
Work in Process Inventory($474,000 × 0.60)284,400
Manufacturing Overhead
284,400
Cash
824,000
Sales
Cost of Goods Sold
Work in Process Inventory
824,000
666,000
666,000
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43.
Direct Material Inventory
Accounts Payable
Work in Process Inventory
Cash/Wages Payable
70,000
70,000
Manufacturing Overhead
Various accounts
75,500
75,500
72,000
72,000
Work in Process Inventory
72,000
Manufacturing Overhead
($72,000 ÷ 8,000 DLH = $9 per DLH)
72,000
Work in Process Inventory
Direct Material Inventory
($10,000 + $70,000 $3,000)
77,000
77,000
Finished Goods Inventory
Work in Process Inventory
(Beginning WIP $25,000 +
$77,000 DM + $75,500 DL
+ $72,000 OH = $249,500;
$249,500 – Ending WIP
$10,500 = Completed Goods
of $239,000)
239,000
Cash/Accounts Receivable
Sales
133,000
Cost of Goods Sold
Finished Goods Inventory
95,000
239,000
133,000
95,000
End. Finished Goods Inventory = $21,000 + $239,000
$95,000 = $165,000
44.
a.
Sept. 1
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Job Order Costing
119
Raw Material Inventory
Accounts Payable
970,000
970,000
4 Work in Process Inventory 924,400
Manufacturing Overhead 25,600
Raw Material Inventory
950,000
Issuances made to jobs as
follows: #75, $44,800;
#78, $226,800; #82, $396,600;
#86, $256,200
15 Work in Process Inventory 332,800
Manufacturing Overhead 35,700
Cash
368,500
Labor charged to jobs as follows:
#75, $44,300; #78, $111,600; #82, $121,500;
#86, $55,400; payroll taxes are ignored.
16 Work in Process Inventory 249,600
Manufacturing Overhead
249,600
To apply overhead to jobs as
follows: #75, $33,225;
#78, $83,700; #82, $91,125;
#86, $41,550. OH is applied at
the rate of $7.50 per DLH.
16
Finished Goods Inventory 715,525
Work in Process Inventory
715,525
($593,200 + $44,800 + $44,300 + $33,225)
Cost of Goods Sold
715,525
Finished Goods Inventory
715,525
Accounts Receivable
894,406
Sales ($715,525 × 1.25)
894,406
20 Manufacturing Overhead 56,100
Accounts Payable 90,400
Cash 146,500
(OH = $17,800 + $38,300 + $56,100)
24 Raw Material Inventory 412,000
Accounts Payable 412,000
25 Work in Process Inventory 375,200
Manufacturing Overhead 27,200
Raw Material Inventory
402,400
Issuances made to jobs as
follows: #78, $74,400;
Chapter 5
Job Order Costing
#82, $108,300; #86, $192,500
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Chapter 5
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121
30 Manufacturing Overhead 254,600
Accumulated Depreciation
209,500
Prepaid Insurance
32,100
Taxes & Licenses Payable
13,000
30 Work in Process Inventory 324,700
Manufacturing Overhead 32,500
Salaries and Wages Payable
357,200
Labor charged to jobs as
follows: #78, $88,400;
#82, $116,500; #86, $119,800
30 Work in Process Inventory 243,525
Manufacturing Overhead
243,525
To apply overhead to jobs as
follows: #78, $66,300;
#82, $87,375; #86, $89,850
b.
Raw materials Overhead
Balance 332,400| 950,000 Materials 25,600| 249,600
Purchases 970,000| 402,400 Labor 35,700| 243,525
Purchases 412,000| Utilities 17,800|
Balance 362,000 Rent 38,300|
Materials 27,200|
Depreciation 209,500|
Insurance 32,100|
Taxes & Lic. 13,000|
Labor 32,500|
Work in Process Cost of Goods Sold
Balance 1,056,300| Completed 715,525 Balance 4,732,000|
DM 1,299,600|
Sold #75 715,525|
DL 657,500|
Balance 5,447,525
Applied OH 493,125|
Balance 2,791,000|
Job #75 Job #78
Balance 593,200| 715,525
Balance 316,800|
DM 44,800|
DM
301,200|
DL 44,300|
DL
200,000|
OH 33,225| OH
150,000|
Balance 0|
Balance 968,000|
Job #82 Job #86
Balance 146,300|
DM 448,700|
DM
504,900|
DL
175,200|
122
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Job Order Costing
DL
238,000|
OH
131,400|
OH
178,500|
Balance 755,300|
Balance 1,067,700|
c.
Schedule of Job Cost Records
September 30, 2003
Job #78
$ 968,000
Job #82
1,067,700
Job #86
755,300
Total
$2,791,000
45.
d.
Actual overhead for September
Applied overhead for September
Overrapplied overhead
$431,700
(493,125)
$ 61,425
a.
Raw Material Inventory
Cash
542,000
Overhead
Work in Process Inventory
Wages Payable/Cash
54,000
602,800
Overhead
Work in Process Inventory
Raw Material Inventory
76,000
466,400
Overhead
Various accounts
(OH costs other than
indirect labor and indirect
materials $244,400 $54,000
$76,000 = $114,400)
114,400
542,000
656,800
542,400
114,400
Work in Process Inventory
241,120
Overhead ($0.40 × $602,800)
241,120
(OH rate = $240,000 ÷ $600,000 = $0.40 per DL$
Finished Goods Inventory
1,769,624
Work in Process Inventory
(See schedule below.)
Cost of Goods Sold
1,769,624
Finished Goods Inventory
Cash
Sales
Job
247
251
1,769,624
1,769,624
2,264,774
2,264,774
Schedule of Completed Jobs
Direct Material Direct Labor Applied OH Total
$ 89,600
$108,800
$ 41,692 $ 240,092
182,800
218,600
83,244 484,644
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Job Order Costing
253
162,200
190,600
72,848 425,648
254
105,200
136,600
54,640 296,440
255
119,800
145,000 58,000 322,800
Totals
$659,600
$799,600 $310,424 $1,769,624
b.
Job Direct Material Direct Labor Applied OH Total
256
$ 72,800 $ 94,600
$ 37,840 $205,240
257
133,200
179,400 71,760 384,360
Totals
$206,000
$274,000
$109,600 $589,600
46.
c.
Actual overhead
Applied overhead
Underapplied overhead
Unadjusted cost of jobs completed
Adjusted cost of jobs completed
a.
Job #
411
412
Material
$ 950
620
$1,570
b.
(1)
BI
Purchases
Available
Issuances
EI
Aluminum Steel Other Total
$ 4,150
$ 6,400 $ 2,900 $13,450
49,150
13,250 11,775 74,175
$53,300
$19,650 $14,675 $87,625
29,350
17,100
12,950 59,400
$23,950
$ 2,550 $ 1,725 $28,225
*
$ 244,400
241,120
$ 3,280
1,769,624
$1,772,904
Labor
OH
Total
$270* $ 750* $1,970
75** 450** 1,145
$345 $1,200 $3,115
DL = 18 × $15 = $270; OH = 25 × $30 = $750
DL = 5 × $15 = $75; OH = 15 × $30 = $450
**
(2)
Work in Process consists only of Job #417:
Direct materials
$310
Direct labor
60
Overhead
240
Total
$610
(3)
WIP beginning
$ 3,115
Direct materials (summation of issuances) 59,400
Direct labor (340 × $15)
5,100
Overhead (600 × $30.00)
18,000
$85,615
WIP ending
(610)
Cost of goods manufactured
$85,005
FG beginning
11,900
Cost of goods available for sale
$96,905
FG ending
0
Cost of goods sold $96,905
Chapter 5
Job Order Costing
124
125
Chapter 5
Job Order Costing
47.
48.
a.
Using any of the jobs, one can determine that the
relationship between direct labor and applied overhead is
that overhead is about 115% of direct labor cost. To
illustrate, using job #167: $7,960 ÷ $6,920 = 1.15 per
direct labor dollar.
b.
Direct material
Direct labor
Applied overhead ($3,600 × 1.15)
Total
c.
Total direct material (DM column) $256,917
Less direct material in BI
(12,900)
$244,017
Total direct labor (DL column) $ 46,860
Less direct labor in BI
(3,600)
Total direct cost added during May
43,260
$287,277
$12,900
3,600
4,140
$20,640
d.
Work in process beginning
$ 20,640
Costs added during May:
Direct material
$244,017
Direct labor
43,260
Applied overhead ($43,260 × 1.15) 49,749 337,026
$357,666
Work in process ending
($154,215 + $28,500 + ($28,500 × 1.15) (215,490)
Cost of goods manufactured
$142,176
a.
Mixing: $374,000 ÷ 88,000 DLH= $4.25 per DLH
Drying: $494,000 ÷ 104,000 MH = $4.75 per MH
b.
Job #2296:
Mixing (425 hours @ $9)
Drying (20 hours @ $22)
Total DL
$3,825
440
$4,265
Job #2297:
$4,590
506
$5,096
c.
Mixing (510 hours @ $ 9)
Drying (23 hours @ $22)
Total DL
Job #2296:
Mixing (425 hours @ $4.25)
Drying (110 hours @ $4.75)
Total OH applied
$1,806.25
522.50
$2,328.75
Job #2297:
$2,167.50
593.75
$2,761.25
Mixing (510 hours @ $4.25)
Drying (125 hours @ $4.75)
Total OH applied
d. Job #2296 Job #2297
Direct Material $ 4,875.00
$ 6,300.00
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Job Order Costing
e.
Direct Labor 4,265.00
5,096.00
Overhead 2,328.75
2,761.25
Total $11,468.75
$14,157.25
Mixing:
Applied (86,400 × $4.25)
$367,200
Actual
(362,000)
Overapplied
$ 5,200
Drying:
Applied (107,800 × $4.75)
Actual
Overapplied
$512,050
(512,000)
$ 50
The company as a whole has overapplied overhead of
$5,250.
49. a.
___________________________________________________________________
Job Cost Sheet
Job #515
Customer Name and Address:
Description of Job: Prepare
site, build and install a
City of Flagstaff
pedestrian overpass in Flagstaff
Flagstaff
see bid specifications for
Arizona
details
Contract Agreement Date: 5/01/03
Scheduled Starting Date: 8/01/03
Agreed Upon Completion Date: 12/15/03 Contract Price: $450,000
Actual Completion Date: _______________________
Special Instructions: None
Direct Material (Est. $120,000)
Date Source Cost
2003
Aug. 31 Summary of
material Req. $30,900
Direct Labor (Est. $135,000) Overhead (Est. $81,000)
Date Source Cost Date Source Cost
2003 2003
Aug.31 Summary of time
Aug. 31 Journal entry
sheets for direct of 8/31/02 $28,512
labor $47,520
Summary
Actual Budget Under(Over)
Direct material
$120,000
Direct labor
135,000
Overhead
81,000
Chapter 5
Job Order Costing
Totals
$336,000
127
