Chapter 07 Job Costing Answer Key
True / False Questions
1.
A job is a product or service that can be easily and conveniently distinguished from other
products/services.
TRUE
This is a definition of a job.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-01 Explain what job and job shop mean.
Topic: Defining a Job
2.
Job cost sheets are used in accounting systems as a subsidiary ledger for the Work-inProcess account.
TRUE
Job cost sheets contain the details of the unfinished work; and constitute the subsidiary ledger
for Work-in-Process, Finished Goods, and Cost of Goods Sold.
AACSB: Analytical Thinking
AICPA: FN Measurement
7-119
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-01 Explain what job and job shop mean.
Topic: Computing the Cost of a Job
3.
Job shops have three types of inventory accounts: Direct Materials, Work-in-Process, and
Finished Goods.
TRUE
This is a correct statement as far as inventory accounts.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: 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
The ending Finished Goods inventory account consists of the direct materials, direct labor,
and manufacturing overhead of all jobs that have been completed.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
7-120
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: 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 because direct costs are traceable to jobs while overhead is allocated.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
6.
Indirect material and indirect labor are two examples of manufacturing overhead costs.
TRUE
Indirect material and labor are included in overhead because they are considered to be
insignificant in cost (material) and not directly related to the job (labor).
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-121
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
7.
The journal entry to record actual manufacturing overhead for indirect material debits
Manufacturing Overhead (Control) and credits Accounts Payable.
FALSE
The credit is to materials inventory.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
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 should be to Wages Payable.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-122
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
9.
The periodic allocation of manufacturing overhead costs to job cost sheets is based on an
event, not a transaction.
TRUE
The allocation of manufacturing overhead takes place at the end of a period (Work-in-Process)
or the completion of a job (transfer to Finished Goods Inventory).
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-123
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
11.
The journal entry to apply manufacturing overhead costs to completed jobs credits either
Applied Manufacturing Overhead or Manufacturing Overhead (Control).
TRUE
The credit can be made to either account depending on the organization's chart of accounts.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
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 overhead rate is applied to all manufacturing activity during the business year.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-124
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
13.
Overapplied overhead occurs when the actual overhead costs incurred during a period are
greater than the overhead costs applied during the period.
FALSE
An overapplied overhead situation occurs when the applied overhead exceeds the actual
overhead incurred.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
14.
Underapplied overhead occurs when the actual overhead costs incurred during a period are
greater than the overhead costs applied during the period.
TRUE
An underapplied overhead situation occurs when the actual overhead incurred exceeds the
applied overhead.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-125
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
15.
Normal costing uses the actual allocation base activity to apply manufacturing overhead costs
to jobs during the period.
TRUE
Normal costing uses the actual allocation base activity to apply manufacturing overhead costs
to jobs during the period.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
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 based on the actual costs incurred during the period.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-126
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
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 Workin-Process.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-04 Apply job costing methods in service organizations.
Topic: Computing the Cost of a Job
18.
Service organizations generally use the same job costing procedures as manufacturers.
TRUE
The difference is the product being produced is intangible.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-04 Apply job costing methods in service organizations.
Topic: Computing the Cost of a Job
7-127
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
19.
It is unethical to intentionally charge costs to the wrong job.
TRUE
It is unethical to knowingly do something wrong.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-05 Understand the ethical issues in job costing.
Topic: Ethical Issues and Job Costing
20.
Most major projects require budget and completion stage revisions at certain intervals due to
their inherent uncertainty.
TRUE
Most major projects require changes due to their inherent uncertainty.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-06 Describe the difference between jobs and projects.
Topic: Managing Projects
Multiple Choice Questions
7-128
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
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-inProcess 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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-01 Explain what job and job shop mean.
Topic: Defining a Job
7-129
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
22.
For which of the following businesses would a job order cost system be appropriate?
A. Auto repair shop.
B. Crude oil refinery.
C. Drug manufacturer.
D. Root beer producer.
Auto repair is job order, while the other choices are process cost.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-01 Explain what job and job shop mean.
Topic: Defining a Job
23.
Which of the following is not a characteristic of job costing?
A. Each job is distinguishable from other jobs.
B. Identical units are produced on an ongoing basis.
C. Job cost data are used for setting prices and bids.
D. It is possible to compare actual costs with estimated costs.
The production of identical units takes place in process costing.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
7-130
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Gradable: automatic
Learning Objective: 07-01 Explain what job and job shop mean.
Topic: 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.
Advertising clients have different requirements.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-01 Explain what job and job shop mean.
Topic: Defining a Job
7-131
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
25.
The journal entry to record the completion of a job in a job order cost system is:
A. Work-In-Process Inventory
xxx
Materials Inventory
B.
Materials Inventory
xxx
xxx
Purchases
C. Cost of Goods Sold
xxx
xxx
Finished Goods Inventory
D. Finished Goods Inventory
Work-In-Process Inventory
xxx
xxx
xxx
A. Option A
B. Option B
C. Option C
D. Option D
When a job is complete it leaves work-in-process and goes to finished goods.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-132
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
26.
The journal entry to record requisitions of material for new jobs started during the period is:
A. Work-In-Process Inventory
xxx
Materials Inventory
B.
Materials Inventory
xxx
xxx
Purchases
C. Cost of Goods Sold
xxx
xxx
Finished Goods Inventory
D. Finished Goods Inventory
Work-In-Process Inventory
xxx
xxx
xxx
A. Option A
B. Option B
C. Option C
D. Option D
A requisition is a request for material from the production process, so it is materials entering
production.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-133
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
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.
The material requisition form moves inventory from raw materials to work-in-process.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: 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. Purchase order.
C. Receiving report.
D. Time card.
The time card has to do with labor being incurred.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
7-134
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: 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.
Actual overhead incurred is entered into the Manufacturing Overhead Control account.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-135
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
30.
Compute the Work-in-Process transferred to the finished goods warehouse on April 30 using
the following information:
Work-In-Process Inventory, April 30
$175
Direct material purchased during April
150
Work-In-Process Inventory, April 1
200
Direct labor costs incurred
300
Manufacturing overhead costs
250
Direct materials used in production
125
A. $650.
B. $675.
C. $700.
D. $750.
$200 + 125 + 300 + 250 - 175 = $700 Cost of Goods Manufactured
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-136
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
31.
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.
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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-137
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
32.
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.
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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-138
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
33.
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.
What is the journal entry to record the direct labor costs for the period?
A.
Labor Inventory
XXX
Wages Payable
B. Work-In-Process Inventory
XXX
XXX
Wages Payable
C. Manufacturing Overhead Control
XXX
XXX
Wages Payable
D.
Wages Expense
Cash
XXX
XXX
XXX
A. Option A
B. Option B
C. Option C
D. Option D
Direct labor costs are traced to the Work-in-Process; any indirect labor would go to
7-139
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
manufacturing overhead.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
34.
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.
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: Analytical Thinking
AICPA: FN Measurement
7-140
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
35.
The journal entry to record the actual manufacturing overhead costs for indirect material is:
A. Manufacturing Overhead Control
xxx
Materials Inventory
B. Materials Inventory
xxx
xxx
Applied Manufacturing Overhead
C. Manufacturing Overhead Control
xxx
xxx
Finished Goods Inventory
D. Work-In-Process Inventory
xxx
xxx
Applied Manufacturing Overhead
xxx
A. Option A
B. Option B
C. Option C
D. Option D
The materials are removed from the Materials Inventory account and put into the
Manufacturing Overhead Control account.
AACSB: Analytical Thinking
AICPA: FN Measurement
7-141
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
36.
The general journal entry to record the issuance of the materials represented by the following
materials requisitions for the month includes:
Requisition No.
Description
Amount
372
Job No. 179
$5,250
373
Job No. 184
$3,700
374
Job No. 180
$4,525
375
General factory use
376
Job No. 182
$725
$2,470
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.
$5,250 + 3,700 + 4,525 + 2,470 = $15,945 to Work-in-Process Inventory
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-142
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
37.
The financial records for the Harrison 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.
Direct Materials Inventory
Beg. Bal.
8,000
Purchases
End. Bal.
Cost of Goods Sold
Transferred
$57,000
Out?
?
6,400
Work-in-Process Inventory
Beg. Bal.
7,500
Materials
18,000
Labor
13,500
Overhead
8,000
End. Bal.
?
Transferred
Out?
Finished Goods Inventory
Beg. Bal.
Transferred
in
End. Bal.
?
Transferred
Out?
39,500
4,200
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: Analytical Thinking
AICPA: FN Measurement
7-143
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-144
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
38.
The financial records for the Harrison 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.
Direct Materials Inventory
Beg. Bal.
8,000
Purchases
Cost of Goods Sold
Transferred
$57,000
Out?
?
End. Bal.
6,400
Work-in-Process Inventory
Beg. Bal.
7,500
Materials
18,000
Labor
13,500
Overhead
End. Bal.
8,000
?
Transferred
Out?
Finished Goods Inventory
Beg. Bal.
Transferred
in
End. Bal.
?
Transferred
Out?
39,500
4,200
What is the value of the ending Work-in-Process inventory balance?
A. $0.
B. $4,200.
C. $7,500.
D. $8,000.
$7,500 + $18,000 + $13,500 + $8,000 - $39,500 = $7,500
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
7-145
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-146
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
39.
The financial records for the Harrison 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.
Direct Materials Inventory
Beg. Bal.
8,000
Purchases
Cost of Goods Sold
Transferred
$57,000
Out?
?
End. Bal.
6,400
Work-in-Process Inventory
Beg. Bal.
7,500
Materials
18,000
Labor
13,500
Overhead
8,000
End. Bal.
?
Transferred
Out?
Finished Goods Inventory
Beg. Bal.
Transferred
in
End. Bal.
?
Transferred
Out?
39,500
4,200
What is the value of the beginning Finished Goods Inventory?
A. $0.
B. $4,200.
C. $13,300.
D. $21,700.
Beginning FGI + $39,500 - $57,000 = $4,200; Beginning FGI = $21,700
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
7-147
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
40.
Stock Co. uses a job order costing system. The following debits (credits) appeared in Stock's
work-in-process account for the month of April:
April Description
Amount
1 Balance
$4,000
30 Direct materials
24,000
30 Direct labor
16,000
30 Factory overhead
12,800
30 To finished goods
(48,000)
Stock 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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
7-148
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
41.
The following are Margin Co.'s production costs for December:
Direct Material
$100,000
Direct Labor
Factory Overhead
90,000
4,000
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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-149
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
42.
Under Eagle Co.'s job order costing system, manufacturing overhead is applied to Work-inProcess using a predetermined annual overhead rate. During February, Eagle's transactions
included the following:
Direct materials issued to production
$90,000
Indirect materials issued to production
8,000
Manufacturing overhead incurred
125,000
Manufacturing overhead applied
113,000
Direct labor costs
107,000
Eagle had neither beginning nor ending inventory in Work-in-Process Inventory. What was the
cost of jobs completed in February? (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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-150
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
43.
Pigot Corporation uses job costing and has two production departments, M and A. Budgeted
manufacturing costs for the year are as follows:
Dept. M
Dept. A
$700,000
$100,000
Direct labor
200,000
800,000
Factory overhead
600,000
400,000
Direct materials
The actual direct material and direct labor costs charged to Job. No. 432 during the year were
as follows:
Direct material
$25,000
Direct labor:
Department M
$8,000
Department A
12,000
20,000
Pigot 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.
B. $55,000.
C. $65,000.
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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
7-151
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-152
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
44.
The Falcon 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:
Direct Materials Inventory
$12,000
Work-in-Process Inventory
4,500
Finished Goods Inventory
11,000
Manufacturing Overhead Control
16,500
Accounts Payable
6,000
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.
What is the ending balance in the Work-in-Process Inventory on June 30?
A. $4,800.
B. $5,300.
C. $9,300.
7-153
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
D. $9,800.
$180,000/60,000 = $3.00 per DLH; $2,600 + 300($6.00) + 300($3.00) = $5,300
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-154
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
45.
The Falcon 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:
Direct Materials Inventory
$12,000
Work-in-Process Inventory
4,500
Finished Goods Inventory
11,000
Manufacturing Overhead Control
16,500
Accounts Payable
6,000
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.
What is the amount of direct materials purchased during June?
A. $38,000.
B. $40,000.
C. $42,000.
7-155
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
D. $43,000.
$6,000 + materials purchased - $40,000 = $8,000; Materials purchased = $42,000
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-156
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
46.
The Falcon 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:
Direct Materials Inventory
$12,000
Work-in-Process Inventory
4,500
Finished Goods Inventory
11,000
Manufacturing Overhead Control
16,500
Accounts Payable
6,000
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.
What document is used to determine the actual amount of direct labor to record on a job cost
sheet?
A. Time ticket.
B. Payroll register.
7-157
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
C. Production order.
D. Wages payable account.
Direct labor is recorded on the job cost sheet through the use of the time ticket, time card, or
electronic input.
AACSB: Reflective Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-158
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
47.
The Falcon 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:
Direct Materials Inventory
$12,000
Work-in-Process Inventory
4,500
Finished Goods Inventory
11,000
Manufacturing Overhead Control
16,500
Accounts Payable
6,000
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.
What is the Cost of Goods Manufactured for June?
A. $89,000.
B. $84,000.
C. $94,000.
7-159
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
D. $99,000.
$11,000 + CoGM - $16,000 = $84,000; CoGM = $89,000
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-160
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
48.
The Falcon 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:
Direct Materials Inventory
$12,000
Work-in-Process Inventory
4,500
Finished Goods Inventory
11,000
Manufacturing Overhead Control
16,500
Accounts Payable
6,000
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.
In a job-order costing system, direct labor cost is ordinarily debited to:
A. Manufacturing Overhead.
B. Cost of Goods Sold.
C. Finished Goods.
7-161
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
D. Work-in-Process.
Direct labor cost is ordinarily debited to Work-in-Process.
AACSB: Reflective Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
49.
Which of the following accounts is debited when direct labor is recorded?
A. Work-in-Process.
B. Salaries and wages expense.
C. Salaries and wages payable.
D. Manufacturing overhead.
The Work-in-Process account is debited when direct labor is recorded.
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-162
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
50.
The balance in the Work-in-Process account equals:
A. the balance in the Finished Goods inventory account.
B. the balance in the Cost of Goods Sold account.
C. the balances on the job cost sheets of uncompleted jobs.
D. the balance in the Manufacturing Overhead account.
The balance in the Work-in-Process account equals the job cost sheet balances of
uncompleted jobs (the subsidiary ledger).
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-163
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
51.
Grayson Inc. has provided the following data for the month of October. The balance in the
Finished Goods inventory account at the beginning of the month was $49,000 and at the end
of the month was $45,000. The cost of goods manufactured for the month was $226,000. The
actual manufacturing overhead cost incurred was $74,000 and the manufacturing overhead
cost applied to Work-in-Process was $70,000. The adjusted cost of goods sold that would
appear on the income statement for October is:
A. $226,000.
B. $230,000.
C. $222,000.
D. $234,000.
See calculation below.
Adjusted cost of goods sold = Beginning finished goods inventory + Cost of goods
manufactured + Actual manufacturing overhead - Applied manufacturing overhead - Ending
finished goods inventory
= $49,000 + $226,000 + $74,000 - $70,000 - $45,000
= $234,000 adjusted cost of goods sold
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-164
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
52.
Delgato Corporation, a manufacturing company, has provided data concerning its operations
for September. The beginning balance in the raw materials account was $37,000 and the
ending balance was $29,000. Raw materials purchases during the month totaled $57,000.
Manufacturing overhead cost incurred during the month was $102,000, of which $2,000
consisted of raw materials classified as indirect materials. The direct materials cost for
November was:
A. $63,000.
B. $57,000.
C. $65,000.
D. $49,000.
See calculation below.
Direct materials cost = Beginning raw materials inventory + Raw materials purchases Indirect materials - Ending raw materials
= $37,000 + 57,000 - $2,000 - $29,000
= $63,000 direct materials cost
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-165
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
53.
Under Lamar Company's job-order costing system, manufacturing overhead is applied to
Work-in-Process inventory using a predetermined overhead rate. During June, Lamar's
transactions included the following:
Direct materials issued to production
$90,000
Indirect materials issued to production
$8,000
Manufacturing overhead cost incurred
$125,000
Manufacturing overhead cost applied
$113,000
Direct labor cost incurred
$107,000
Lamar Company had no beginning or ending inventories. What was the cost of goods
manufactured for June? (CMA adapted)
A. $302,000.
B. $310,000.
C. $322,000.
D. $330,000.
See calculation below.
Cost of goods manufactured = Beginning Work-in-Process inventory + Direct materials +
Direct labor + Applied manufacturing overhead - Ending Work-in-Process inventory
= $0 + $90,000 + $107,000 + $113,000 - $0
= $310,000 cost of goods manufactured
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-166
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
54.
Demur Inc., a manufacturing company, has provided the following data for the month of April.
The balance in the Work-in-Process inventory account was $10,000 at the beginning of the
month and $22,000 at the end of the month. During the month, the company incurred direct
materials cost of $63,000 and direct labor cost of $39,000. The actual manufacturing overhead
cost incurred was $40,000. The manufacturing overhead cost applied to Work-in-Process was
$43,000. The cost of goods manufactured for April was:
A. $133,000.
B. $142,000.
C. $145,000.
D. $130,000.
See calculation below.
Cost of goods manufactured = Beginning Work-in-Process inventory + Direct materials +
Direct labor + Applied manufacturing overhead - Ending Work-in-Process inventory
= $10,000 + $63,000 + $39,000 + $43,000 - $22,000
= $133,000 cost of goods manufactured
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-167
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
55.
Fogel Flight Company uses a job-order costing system. The direct materials for Job #045391
were purchased in September and put into production in October. The job was not completed
by the end of October. At the end of October, in what account would the direct material cost
assigned to Job #045391 be located?
A. Raw materials inventory.
B. Work-in-Process inventory.
C. Finished goods inventory.
D. Cost of goods manufactured.
The uncompleted job would be located in Work-in-Process.
AACSB: Reflective Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-168
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
56.
Carson Inc. has provided the following data for the month of May. There were no beginning
inventories; consequently, the direct materials, direct labor, and manufacturing overhead
applied listed below are all for the current month.
Workin-
Finished
Process
Direct
materials
Direct labor
Goods
Cost of
Goods
Total
Sold
$5,010 $11,500 $111,320 $127,830
2,430
10,500 101,640 114,570
Manufacturing
overhead
3,200
7,200
69,600
80,000
applied
Total
$10,640 $29,200 $282,560 $322,400
Manufacturing overhead for the month was underapplied by $10,000.
The company allocates any underapplied or overapplied overhead among Work-in-Process,
finished goods, and cost of goods sold at the end of the month on the basis of the overhead
applied during the month in those accounts.
The journal entry to record the allocation of any underapplied or overapplied overhead for
May would include the following:
A. credit to Finished Goods of $900.
B. debit to Finished Goods of $29,200.
C. credit to Finished Goods of $29,200.
D. debit to Finished Goods of $900.
See calculation below.
7-169
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Work-in-Process (4% × $10,000)
$400
Finished Goods (9% × $10,000)
$900
Cost of Goods Sold (87% ×
$10,000)
Manufacturing Overhead
$8,700
$10,000
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-170
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
57.
The following selected data were taken from the books of the Owens O-Rings Company. The
company uses job costing to account for manufacturing costs. The data relate to April
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:
Job 405
$11,000 3,000 hours
Job 406
$14,000 3,600 hours
Job 407
$8,000 1,900 hours
Indirect labor
$3,700
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.
If Job 406 was sold on account for $41,500, how much gross profit would be recognized for
the job?
A. $3,800.
B. $5,900.
7-171
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
C. $18,500.
D. $35,600.
$41,500 - [($3,000 + 6,000) + $14,000 + ($3.50 × 3,600)] = $5,900
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-172
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
58.
The following selected data were taken from the books of the Owens O-Rings Company. The
company uses job costing to account for manufacturing costs. The data relate to April
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:
Job 405
$11,000 3,000 hours
Job 406
$14,000 3,600 hours
Job 407
$8,000 1,900 hours
Indirect labor
$3,700
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.
The end of the month Work-in-Process Inventory balance would be:
A. $18,200.
B. $24,850.
C. $64,100.
7-173
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
D. $88,950.
[($7,000 + 3,200) + $8,000 + ($3.50 × 1,900)] = $24,850
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-02 Assign costs in a job cost system.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-174
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
59.
The following selected data were taken from the books of the Owens O-Rings Company. The
company uses job costing to account for manufacturing costs. The data relate to April
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:
Job 405
$11,000 3,000 hours
Job 406
$14,000 3,600 hours
Job 407
$8,000 1,900 hours
Indirect labor
$3,700
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.
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.
7-175
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
D. $4,350 overapplied.
Manufacturing Overhead Control = $2,300 + 3,700 + 19,400 + 5,400 = $30,800 - Applied
Manufacturing Overhead $29,750 = $1,050 Underapplied
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
60.
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.
When transfers occur from Finished Goods Inventory they go to Cost of Goods Sold.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-176
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
61.
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.
Finished Goods Inventory is charged and Work-in-Process Inventory is relieved for all jobs
completed during the period.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-177
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
62.
Which of the following events or transactions will not result in manufacturing overhead being
applied to production?
A. Completion of a job in the current period that was started in a prior period.
B. Completion of a job in the current period that was started in the current period.
C. Preparing financial statements when work is in process at the end of the period.
D. Preparing financial statements when there is no Work-in-Process at the end of the period.
The absence of Work-in-Process at the end of the period results in no overhead being applied.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-178
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
63.
The journal entry to record the completion of a job in a job costing system is:
A. Finished Goods Inventory
xxx
Materials Inventory
xxx
B. Work-In-Process Inventory
xxx
Applied Manufacturing Overhead
C. Manufacturing Overhead Control
xxx
xxx
Finished Goods Inventory
D. Finished Goods Inventory
Work-In-Process Inventory
xxx
xxx
xxx
A. Option A
B. Option B
C. Option C
D. Option D
Completed jobs are relieved from Work-in-Process Inventory and transferred to Finished
Goods Inventory.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-179
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
64.
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. direct material purchased in May.
It is not necessary for a job completed in May to incur material costs, but it must incur direct
labor and overhead.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
65.
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 occurs when the actual overhead incurred exceeds the overhead applied to
jobs.
AACSB: Analytical Thinking
7-180
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
66.
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.
Overhead is applied when a job is completed or at the end of a period when financial
statement are prepared.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-181
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
67.
The journal entry to write-off an insignificant underapplied overhead balance at the end of an
accounting period is:
A. Applied Manufacturing Overhead
Cost of Goods Sold
XXX
XXX
Manufacturing Overhead Control
B. Applied Manufacturing Overhead
XXX
XXX
Cost of Goods Sold
XXX
Manufacturing Overhead Control
XXX
C. Applied Manufacturing Overhead
XXX
Work-In-Process Inventory
XXX
Finished Goods Inventory
XXX
Cost of Goods Sold
XXX
Manufacturing Overhead Control
D. Applied Manufacturing Overhead
XXX
XXX
Work-In-Process Inventory
XXX
Finished Goods Inventory
XXX
Cost of Goods Sold
XXX
Manufacturing Overhead Control
XXX
A. Option A
B. Option B
C. Option C
D. Option D
The most conservative method is to write-off the immaterial amount directly to Cost of Goods
7-182
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Sold.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-183
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
68.
The journal entry to write-off a significant underapplied overhead balance at the end of an
accounting period is:
A. Applied Manufacturing Overhead
Cost of Goods Sold
XXX
XXX
Manufacturing Overhead Control
B. Applied Manufacturing Overhead
XXX
XXX
Cost of Goods Sold
XXX
Manufacturing Overhead Control
XXX
C. Applied Manufacturing Overhead
XXX
Work-In-Process Inventory
XXX
Finished Goods Inventory
XXX
Cost of Goods Sold
XXX
Manufacturing Overhead Control
D. Applied Manufacturing Overhead
XXX
XXX
Work-In-Process Inventory
XXX
Finished Goods Inventory
XXX
Cost of Goods Sold
XXX
Manufacturing Overhead Control
XXX
A. Option A
B. Option B
C. Option C
D. Option D
Significant underapplied (and overapplied) overhead balances should be allocated to the three
7-184
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
accounts that have overhead.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
69.
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.
Predetermined rate implies either standard or normal costing. Actual activity level is used by
normal; standard activity level is used by standard costing.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-185
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
70.
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.
Actual overhead rate implies an actual costing system.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-186
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
71.
The journal entry to write-off an insignificant overapplied overhead balance at the end of an
accounting period for a service firm is:
A. Applied Manufacturing Overhead
Cost of Services Billed
XXX
XXX
Manufacturing Overhead Control
B. Applied Manufacturing Overhead
XXX
XXX
Cost of Services Billed
XXX
Manufacturing Overhead Control
XXX
C. Applied Manufacturing Overhead
XXX
Work-In-Process Inventory
XXX
Finished Goods Inventory
XXX
Cost of Services Billed
XXX
Manufacturing Overhead Control
D. Applied Manufacturing Overhead
XXX
XXX
Work-In-Process Inventory
XXX
Finished Goods Inventory
XXX
Cost of Services Billed
XXX
Manufacturing Overhead Control
XXX
A. Option A
B. Option B
C. Option C
D. Option D
The most conservative method is to write-off the immaterial amount directly to Cost of Goods
7-187
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Sold.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
72.
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.
Actual $124,000 - Applied $120,000 = $4,000 underapplied.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-188
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
73.
Travis Company's records show that overhead was overapplied by $10,000 last year. This
overapplied overhead was closed out to the Cost of Goods Sold account at the end of the
year. In trying to determine why overhead was overapplied by such a large amount, the
company has discovered that $6,000 of depreciation on factory equipment was charged to
administrative expense in error. Given the above information, which of the following
statements is true?
A. Manufacturing overhead was actually overapplied by $16,000 for the year.
B. The company's net income is understated by $6,000 for the year.
C. Under the circumstances posed above, the error in recording depreciation would have no
effect on operating income for the year.
D. The $6,000 in depreciation should have been charged to Work-in-Process rather than to
administrative expense.
If the entry for factory equipment depreciation had been correctly recorded, overhead would
have been overapplied by $4,000 rather than $10,000. Recording factory equipment
depreciation as administrative depreciation, while in error, has the same impact on operating
income as recording the entry correctly.
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-189
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
74.
The actual manufacturing overhead incurred at Liberty Industries during May was $59,000,
while the manufacturing overhead applied to Work-in-Process was $74,000. The company's
Cost of Goods Sold was $289,000 prior to closing out its Manufacturing Overhead account.
The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of
the following statements is true?
A. Manufacturing overhead was overapplied by $15,000; Cost of Goods Sold after closing out
the Manufacturing Overhead account is $274,000.
B. Manufacturing overhead was underapplied by $15,000; Cost of Goods Sold after closing
out the Manufacturing Overhead account is $274,000.
C. Manufacturing overhead was overapplied by $15,000; Cost of Goods Sold after closing out
the Manufacturing Overhead account is $304,000.
D. Manufacturing overhead was underapplied by $15,000; Cost of Goods Sold after closing
out the Manufacturing Overhead account is $304,000.
See calculation below.
Actual manufacturing overhead incurred
Manufacturing overhead applied to Workin-Process
Overapplied manufacturing overhead
$59,000
$74,000
$15,000
The closing entry would reduce the balance in Cost of goods sold from $289,000 by $15,000.
Cost of goods sold after closing out the Manufacturing overhead account would be $274,000.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
7-190
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Topic: Computing the Cost of a Job
75.
The predetermined overhead rate for manufacturing overhead for 2016 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 2016?
A. $60,000.
B. $75,000.
C. $80,000.
D. $93,750.
($100,000 × .75)/$5.00 = 15,000 hours; 15,000 × $4.00 = $60,000
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-191
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
76.
Before prorating the manufacturing overhead costs at the end of 2016, 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 2016. 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 2016. 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.
C. $1,283.
D. $2,597.
$77,500 - 74,000 = $3,500 overapplied overhead; [$20,000/(57,500 + 20,000)] × $3,500 =
$903
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-192
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
77.
Before prorating the manufacturing overhead costs at the end of 2016, 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 2016. 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 2016. 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.
B. $56,597.
C. $60,197.
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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-193
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
78.
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 increases Manufacturing Overhead Control.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
79.
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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
7-194
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-05 Understand the ethical issues in job costing.
Topic: Ethical Issues and Job Costing
80.
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 allocates overhead by multiplying a predetermined overhead rate by actual
activity.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-195
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
81.
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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
82.
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: Analytical Thinking
7-196
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
83.
Reyes Corporation applies overhead using a normal costing approach based upon machinehours. 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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-197
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
84.
Reyes Corporation applies overhead using a normal costing approach based upon machinehours. 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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-198
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
85.
Reyes 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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-199
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
86.
Reyes 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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-200
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
87.
Reyes Corporation applies overhead using a normal costing approach based upon machinehours. 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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-201
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
88.
Reyes Corporation applies overhead using a normal costing approach based upon machinehours. 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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-202
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
89.
Which terms will make the following statement true? When manufacturing overhead is
overapplied, the Manufacturing Overhead account has a __________ balance and applied
manufacturing overhead is greater than __________ manufacturing overhead.
A. debit, actual
B. credit, actual
C. debit, estimated
D. credit, estimated
When manufacturing overhead is overapplied, the Manufacturing Overhead account has a
credit balance and applied manufacturing overhead is greater than actual manufacturing
overhead.
AACSB: Reflective Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-203
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
90.
Which of the following is correct with respect to closing out overapplied manufacturing
overhead to Cost of Goods Sold versus closing it out to Cost of Goods Sold and Finished
Goods and Work-in-Process inventories?
A. The balance in the Work-in-Process account after allocation will be higher if the
overapplied overhead is closed out by allocating it to all appropriate accounts.
B. The balance in the Work-in-Process account after allocation will be the same under either
method.
C. Operating income will be higher if all of the overapplied overhead is closed out to Cost of
Goods Sold.
D. Cost of Goods Sold will be lower if the overapplied overhead is closed out by allocating it to
the inventory accounts as well as to Cost of Goods Sold.
Closing an overapplied balance in manufacturing overhead, even prorated to Cost of Goods
Sold will cause operating income to be higher.
AACSB: Reflective Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-204
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
91.
Duran Corporation uses direct labor-hours in its predetermined overhead rate. At the
beginning of the year, the total estimated manufacturing overhead was $224,580. At the end
of the year, actual direct labor-hours for the year were 18,200 hours, manufacturing overhead
for the year was underapplied by $12,100, and the actual manufacturing overhead was
$219,580. The predetermined overhead rate for the year must have been closest to:
A. $11.40.
B. $12.34.
C. $12.06.
D. $10.53.
See calculations below.
Manufacturing overhead applied = Actual overhead - Underapplied overhead
= $219,580 - $12,100
= $207,480 manufacturing overhead applied
Predetermined overhead rate = Manufacturing overhead applied ÷ Actual direct labor-hours
= $207,480 ÷ 18,200 direct labor-hours = $11.40 per direct labor-hour
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-205
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
92.
Nexus Corporation uses a predetermined overhead rate based on direct labor cost to apply
manufacturing overhead to jobs. Last year, the company's estimated manufacturing overhead
was $1,200,000 and its estimated level of activity was 50,000 direct labor-hours. The
company's direct labor wage rate is $12 per hour. Actual manufacturing overhead amounted to
$1,240,000, with actual direct labor cost of $650,000. For the year, manufacturing overhead
was:
A. overapplied by $60,000.
B. underapplied by $60,000.
C. overapplied by $40,000.
D. underapplied by $44,000.
See calculations below.
Estimated total
manufacturing overhead
$1,200,000
÷ Estimated total direct
labor-hours
= Predetermined
overhead rate
50,000
$24.00
direct laborhours
per direct
labor-hour
Actual direct labor-hours = Actual direct labor cost ÷ wage rate per hour
= $650,000 ÷ $12.00 per direct labor-hour
= 54,166.67 direct labor-hours
Actual direct labor-hours
× Predetermined overhead rate
= Manufacturing overhead applied
Less: Manufacturing overhead incurred
Manufacturing overhead overapplied
54,166.67
$24.00
$1,300,000
1,240,000
$60,000
7-206
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-207
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
93.
Perion Corporation uses direct labor-hours in its predetermined overhead rate. At the
beginning of the year, the estimated direct labor-hours were 11,200 hours and the total
estimated manufacturing overhead was $259,840. At the end of the year, actual direct laborhours for the year were 10,800 hours and the actual manufacturing overhead for the year was
$254,840. Overhead at the end of the year was:
A. $4,280 overapplied.
B. $9,280 overapplied.
C. $9,280 underapplied.
D. $4,280 underapplied.
See calculation below.
Estimated total
manufacturing overhead
÷ Estimated total direct
labor-hours
= Predetermined overhead
rate
$259,840
11,200
$23.20
direct laborhours
per direct
labor-hour
Actual direct labor-hours
10,800
× Predetermined overhead rate
$23.20
= Manufacturing overhead applied
$250,560
Less: Manufacturing overhead incurred
254,840
Manufacturing overhead underapplied
$4,280
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
7-208
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
94.
At the beginning of the year, manufacturing overhead for the year was estimated to be
$267,500. At the end of the year, actual direct labor-hours for the year were 22,100 hours, the
actual manufacturing overhead for the year was $262,500, and manufacturing overhead for
the year was overapplied by $13,750. If the predetermined overhead rate is based on direct
labor-hours, then the estimated direct labor-hours at the beginning of the year used in the
predetermined overhead rate was:
A. 22,100 direct labor-hours.
B. 19,900 direct labor-hours.
C. 21,000 direct labor-hours.
D. 21,400 direct labor-hours.
See calculation below.
Manufacturing overhead applied = Actual overhead - Underapplied overhead
= $262,500 + $13,750
= $276,250 manufacturing overhead applied
Predetermined overhead rate = Manufacturing overhead applied ÷ Actual direct labor-hours
= $276,250 ÷ 22,100 direct labor-hours
= $12.50 per direct labor-hour
Estimated direct labor-hours = Estimated manufacturing overhead ÷ Predetermined overhead
rate
= $267,500 ÷ $12.50 per direct labor-hour
= 21,400 direct labor-hour
AACSB: Analytical Thinking
AICPA: FN Measurement
7-209
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-210
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
95.
Golden Corporation uses direct labor-hours in its predetermined overhead rate. At the
beginning of the year, the estimated direct labor-hours were 21,600 hours. At the end of the
year, actual direct labor-hours for the year were 20,400 hours, the actual manufacturing
overhead for the year was $506,920, and manufacturing overhead for the year was
underapplied by $23,440. The estimated manufacturing overhead at the beginning of the year
used in the predetermined overhead rate must have been:
A. $501,920.
B. $531,445.
C. $483,480.
D. $511,920.
See calculation below.
Manufacturing overhead applied = Actual overhead - Underapplied overhead
= $506,920 - $23,440
= $483,480 manufacturing overhead applied
Predetermined overhead rate = Manufacturing overhead applied ÷ Actual direct labor-hours
= $483,480 ÷ 20,400 direct labor-hours
= $23.70 per direct labor-hour
Estimated manufacturing overhead = Estimated direct labor-hours × Predetermined overhead
rate
= 21,600 direct labor-hours × $23.70 per direct labor-hour
= $511,920 estimated manufacturing overhead
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
7-211
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-212
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
96.
Fortune Company uses a predetermined overhead rate based on direct labor-hours to apply
manufacturing overhead to jobs.
On October 1, the estimates for the month
were:
Manufacturing overhead
$17,000
Direct labor-hours
13,600
During October, the actual results were:
Manufacturing overhead
$18,500
Direct labor-hours
12,000
The cost records for October will show:
A. Overapplied overhead of $1,500.
B. Underapplied overhead of $1,500.
C. Overapplied overhead of $3,500.
D. Underapplied overhead of $3,500.
See calculation below.
Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated direct labor
= $17,000 ÷ 13,600 direct labor-hours
= $1.25 per direct labor-hour
Applied overhead = Actual direct labor-hours × Predetermined overhead rate
= 12,000 × $1.25 per direct labor-hour
= $15,000 applied overhead
Overapplied/underapplied = Actual manufacturing overhead - Applied overhead
= $18,500 - $15,000 = $3,500 underapplied overhead
AACSB: Analytical Thinking
7-213
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
97.
The Work-in-Process inventory account of a manufacturing firm shows a balance of $3,000 at
the end of an accounting period. The job cost sheets of two uncompleted jobs show charges
of $500 and $300 for materials, and charges of $400 and $600 for direct labor. From this
information, it appears that the company is using a predetermined overhead rate, as a
percentage of direct labor costs, of:
A. 83%.
B. 120%.
C. 40%.
D. 300%.
See calculations below.
Work-in-Process = Materials + Direct labor + Manufacturing overhead
$3,000 = ($500 + $300) + ($400 + $600) + Manufacturing overhead
$1,200 = Manufacturing overhead
Predetermined overhead rate = Manufacturing overhead ÷ Direct labor cost
= $1,200 ÷ $1,000 direct labor cost
= 120% predetermined overhead rate
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
7-214
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-215
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
98.
Faucette Corporation has provided the following data concerning manufacturing overhead for
January:
Actual manufacturing overhead incurred
Manufacturing overhead applied to Workin-Process
$52,000
$75,000
The company's Cost of Goods Sold was $369,000 prior to closing out its Manufacturing
Overhead account. The company closes out its Manufacturing Overhead account to Cost of
Goods Sold. Which of the following statements is true?
A. Manufacturing overhead was underapplied by $23,000; Cost of Goods Sold after closing
out the Manufacturing Overhead account is $392,000.
B. Manufacturing overhead was underapplied by $23,000; Cost of Goods Sold after closing
out the Manufacturing Overhead account is $346,000.
C. Manufacturing overhead was overapplied by $23,000; Cost of Goods Sold after closing out
the Manufacturing Overhead account is $346,000.
D. Manufacturing overhead was overapplied by $23,000; Cost of Goods Sold after closing out
the Manufacturing Overhead account is $392,000.
See calculation below.
Actual manufacturing overhead incurred
Manufacturing overhead applied to Workin-Process
Overapplied manufacturing overhead
$52,000
$75,000
$23,000
The closing entry would reduce the balance in Cost of goods sold from $369,000 by $23,000.
Cost of goods sold after closing out the Manufacturing overhead account would be $346,000.
AACSB: Analytical Thinking
7-216
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
AICPA: BB Critical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
99.
In computing its predetermined overhead rate, Marple Company inadvertently left its indirect
labor costs out of the computation. This oversight will cause:
A. Manufacturing Overhead to be overapplied.
B. the Cost of Goods Manufactured to be understated.
C. the debits to the Manufacturing Overhead account to be understated.
D. the ending balance in Work-in-Process to be overstated.
Not including indirect labor in the Manufacturing Overhead total will result in a lower
predetermined overhead rate. When indirect labor is debited to Manufacturing (actual) it will
not be relieved (credit).
AACSB: Reflective Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-217
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
100.
Which of the following is the correct formula to compute the predetermined overhead rate?
A. Estimated total units in the allocation base divided by estimated total manufacturing
overhead costs.
B. Estimated total manufacturing overhead costs divided by estimated total units in the
allocation base.
C. Actual total manufacturing overhead costs divided by estimated total units in the allocation
base.
D. Estimated total manufacturing overhead costs divided by actual total units in the allocation
base.
Estimated total manufacturing overhead costs divided by estimated total units in the allocation
base.
AACSB: Reflective Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-218
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
101.
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 rate = $2,400 - (400 + 200) - (300 + 500) = $1,000; Overhead rate = $1,000/(300 +
500) = 125.0%
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-219
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
102.
Estimated manufacturing overhead for the
year
Estimated direct labor hours for the year
$30,000
2,000
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.
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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-220
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
103.
Estimated manufacturing overhead for the
year
Estimated direct labor hours for the year
$30,000
2,000
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.
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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-221
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
104.
Estimated manufacturing overhead for the
year
Estimated direct labor hours for the year
$30,000
2,000
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.
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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-222
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
105.
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 increases Manufacturing Overhead Control.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
106.
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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
7-223
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-04 Apply job costing methods in service organizations.
Topic: Computing the Cost of a Job
107.
Which of the following is not a difference between job costing for service firms and job costing
for manufacturing companies?
A. Service firms generally use fewer direct materials than manufacturing companies.
B. Service firms' overhead accounts have slightly different titles (e.g., Applied Service
Overhead).
C. Service firms' finished jobs are charged to Cost of Services Billed instead of Cost of Goods
Sold.
D. 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: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-04 Apply job costing methods in service organizations.
Topic: Computing the Cost of a Job
7-224
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
108.
The journal entry to record the completion of a contract in a job costing system for a service
firm is:
A.
Cost of Services Billed
xxx
Wages Payable
B. Work-In-Process Inventory
xxx
xxx
Wages Payable
C. Cost of Services Billed
xxx
xxx
Work-In-Process Inventory
D. Finished Goods Inventory
Work-In-Process Inventory
xxx
xxx
xxx
A. Option A
B. Option B
C. Option C
D. Option D
As there is no Finished Goods Inventory in a service firm, a job moves from Work-in-Process
to the Cost of Services Billed when it is completed.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-04 Apply job costing methods in service organizations.
Topic: Computing the Cost of a Job
7-225
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
109.
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.
This description is a basic definition of a project.
AACSB: Analytical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 07-06 Describe the difference between jobs and projects.
Topic: Managing Projects
Essay Questions
7-226
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
110.
The financial records for the Lazer 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.
Beginning $ Ending $
Direct materials
$8,000
$6,400
Work-in-process
7,500
???
???
4,200
Finished goods
Other information:
Direct materials used
$18,000
Direct labor
Overhead applied
13,500
8,000
Cost of goods manufactured
39,500
Cost of goods sold
57,000
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
7-227
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
(c) BFG + 39,500 - 57,000 = $4,200; beginning FG = $21,700
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-228
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
111.
The Duggart 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 ___ .
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: Analytical Thinking
7-229
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-230
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
112.
Mirror Lake Corporation recorded the following transactions for the just completed month:
a. $60,000 in raw materials were purchased on account.
b. $51,000 in raw materials were requisitioned for use in production. Of this amount, $42,000
was for direct materials and the remainder was for indirect materials.
c. Total labor wages of $92,000 were incurred and paid. Of this amount, $81,000 was for
direct labor and the remainder was for indirect labor.
d. Additional manufacturing overhead cost of $155,000 were incurred. All were on account.
Required:
Record the above transactions in journal entries.
a. Raw Materials Inventory
60,000
Accounts Payable
60,000
b. Work-in-Process Inventory
42,000
Manufacturing Overhead
9,000
Raw Materials Inventory
51,000
c. Work-in-Process Inventory
81,000
Manufacturing Overhead
11,000
Cash
d. Manufacturing Overhead
Accounts Payable
92,000
155,000
155,000
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 1 Easy
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
7-231
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Topic: Computing the Cost of a Job
113.
During April, Orbitz Corporation incurred $64,000 of actual Manufacturing Overhead costs.
During the same period, the Manufacturing Overhead applied to Work-in-Process was
$66,000.
Required:
Prepare journal entries to record the incurrence of manufacturing overhead and the
application of manufacturing overhead to Work-in-Process.
Manufacturing Overhead
64,000
Various accounts
Work-in-Process
Manufacturing Overhead
64,000
66,000
66,000
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 1 Easy
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-232
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
114.
The following cost data relate to the manufacturing activities of Falco Industries during the just
completed year:
Total actual manufacturing overhead
costs incurred (including $15,000 of
indirect materials)
Purchases of raw materials (both direct
and indirect)
Direct labor cost
$353,000
$250,000
$135,000
Inventories:
Raw materials, beginning
$10,000
Raw materials, ending
$15,000
Work-in-Process, beginning
$20,000
Work-in-Process, ending
$35,000
The company uses a predetermined overhead rate to apply manufacturing overhead cost to
production. The predetermined overhead rate for the year was $15 per machine-hour. A total
of 23,000 machine-hours were recorded for the year.
Required:
a. Compute the amount of underapplied or overapplied overhead cost for the year.
b. Prepare a Schedule of Cost of Goods Manufactured for the year.
a. Actual manufacturing overhead cost
Applied manufacturing overhead cost
Underapplied overhead
$353,000
345,000
$8,000
b. Schedule of Cost of Goods Manufactured
7-233
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Raw materials inventory, beginning
$10,000
Add: Purchases of raw materials
250,000
Total raw materials available
260,000
Deduct: Raw materials inventory, ending
Raw materials used in production
Less: indirect materials
15,000
245,000
15,000
Direct materials
230,000
Direct labor
135,000
Manufacturing overhead applied
345,000
Total manufacturing costs
710,000
Add: Beginning Work-in-Process
inventory
20,000
730,000
Deduct: Ending Work-in-Process
inventory
Cost of goods manufactured
35,000
$695,000
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-234
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
115.
The following selected data were taken from the books of the Fisher Foil 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:
Job 405
$11,000
300 hrs
Job 406
14,000
360 hrs
Job 407
8,000
190 hrs
Indirect labor
3,700
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?
7-235
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
(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: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-236
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
116.
Prepare the necessary journal entries from the following information for Blalock 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.
(a) Materials inventory
$56,700
Accounts payable
(b) WlP (80% × 56,700)
Manufacturing OH control
(15%)
$56,700
45,360
8,505
Materials inventory
(c) WlP
Manufacturing OH control
53,865
33,100
12,500
Payroll
(d) Manufacturing OH control
45,600
52,900
Assorted accounts
(e) WlP ($33,100 × 220%)
52,900
72,820
Manufacturing OH control
(f) Finished goods
72,820
97,600
WIP
(g) Cost of goods sold
97,600
51,320
7-237
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Finished goods
Accounts receivable
51,320
77,600
Sales revenue
(h) Cost of goods sold
Manufacturing OH control
77,600
1,085
1,085
Feedback: (h): Actual OH: $8,505 + 12,500 + 52,900 = 73,905 - Applied 72,820 =
underapplied $1,085
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-238
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
117.
On October 1, the general ledger of Morgan Industries had the following accounts and
balances:
Materials inventory
$19,200
Work-in-process inventory
48,750
Finished goods inventory
8,100
Manufacturing overhead (overapplied)
2,000
The subsidiary ledgers had the following information on October 1:
Finished
Job Cost Sheets
Job
Direct Direct Manufacturing
Number Mat'ls. Labor
B81
B83
Goods Cards
$? $7,000
Job
Overhead Number
Cost
$8,750
B80
$5,200
B82
?
4,300
?
11,500
?
?
$20,250
?
During October, the following costs were incurred on account:
Materials
$46,500
Factory labor
49,000
Manufacturing overhead
56,350
A summary of the materials requisition slips and the labor time tickets for the month revealed
the following distribution:
Applicable To Materials Requisitions Time Tickets
Job B81
$8,000
$4,000
Job B83
5,100
1,700
Job B84
8,600
10,500
Job B85
19,900
16,750
7-239
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Job B86
12,750
?
?
4,500
$58,250
?
General Use
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.
Materials Inventory
BB
19,200
Purch
46,500 58,250 used
EB
7,450
Work-In-Process
BB
48,750
DM
54,350
DL
44,500 106,900 COGM
OH applied
55,625
EB
96,325
Finished Goods
BB
COGM
EB
8,100
106,900 82,775 COGS
32,225
7-240
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Manufacturing OH
Control
2,000 BB
IM
3,900
IL
4,500 55,625 applied
Incurred
EB
56,350
7,125
Feedback: Overhead rate: B81: 8,750/7,000 = 125%
Labor B83: 11,500/125% = 9,200
Job B83 BWIP: 4,300 + 9,200 + 11,500 = 25,000
Job B81 BWIP: 48,750 - 25,000 = 23,750
Direct Labor: 49,000 - 4,500 indirect = 44,500
Direct Materials: 8,000 + 5,100 + 8,600 + 19,900 + 12,750 = 54,350
Indirect materials: 58,250 - 54,350 = 3,900
Applied OH: 44,500 × 125% = 55,625
Job B86 labor: 44,500 - (4,000 + 1,700 + 10,500 + 16,750) = 11,550
Cost of Jobs:
B80: $5,200
B81: 23,750 + 8,000 + 4,000 + 5,000 = $40,750
B82: BFG 8,100 - B80 5,200 = $2,900
B83: 25,000 + 5,100 + 1,700 + 2,125 = $33,925
B84: 8,600 + 10,500 + 13,125 = $32,225
B85: 19,900 + 16,750 + 20,937.50 = $57,587.50
B86: 12,750 + 11,550 + 14,437.50 = $38,737.50
COGM: B81 + B83 + B84 = $40,750 + 33,925 + 32,225 = $106,900
COGS: B80 + B81 + B82 + B83 = $5,200 + 40,750 + 2,900 + 33,925 = $82,775
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 3 Hard
Gradable: manual
7-241
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-242
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
118.
The Shotz 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 ___ .
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.
(1a) Materials inventory
$567,000
Accounts payable
(1b) WIP (85% × 567,000)
Manufacturing OH control
(12%)
$567,000
481,950
68,040
Materials inventory
(1c) WIP
Manufacturing OH control
549,990
331,000
125,000
Payroll
(1d) Manufacturing OH control
456,000
529,000
7-243
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Assorted accounts
(1e) WIP ($331,000 × 220%)
529,000
728,200
Manufacturing OH
728,200
control
(1f) Finished goods
976,000
WIP
976,000
(1g) Cost of goods sold
513,200
Finished goods
Accounts receivable
513,200
776,000
Sales revenue
(2) Manufacturing OH control
776,000
6,160
WIP
2,259
Finished goods
1,850
Cost of goods sold
2,051
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
Account
Balance
%
Allocate
WIP
$565,150
36.67
$2,259
FG
462,800
30.03
1,850
COGS
513,200
33.30
2,051
$1,541,150
100.00
$6,160
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
7-244
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
119.
During July, Morris Corporation purchased $76,000 of raw materials on credit to add to its raw
materials inventory. A total of $81,000 of raw materials was requisitioned from the storeroom
for use in production. These requisitioned raw materials included $5,000 of indirect materials.
Required:
Prepare journal entries to record the purchase of materials and their use in production.
Raw Materials
76,000
Accounts Payable
Work-in-Process
Manufacturing Overhead
Raw Materials
76,000
76,000
5,000
81,000
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 1 Easy
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
7-245
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
120.
The following selected data were taken from the records of the Fisher Foil Company. The
company uses a job costing system to account for its manufacturing costs. Fisher'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.
Job No.
Materials
Labor
Overhead
W12
$800
$1,200
??
X13
1,000
1,620
??
(2.) Jobs completed during August: W12, X13, Y14.
(3.) Material requisitions and labor time tickets indicated the following:
Material
Time
Requisition
Tickets
W12
$610
$760
X13
370
1,420
Y14
2,780
3,100
Z15
4,050
1,080
390
540
Job No
General usc
(4.) Jobs sold during August: W12, X13.
(5.) Fisher applies overhead to production based upon labor costs.
(6.) Selected account balances on August 1 were:
Overhead
$1,400 overapplied
Materials
5,175
Work in process
9.,555
Finished goods
-0-
(7.) Various overhead incurred (excluding indirect materials and indirect labor) during August,
7-246
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
$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?
(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
(c) Job
Beg
Bal
DM
DL
OH
Total
W12
4,100
610
760 1,330
6,800
X13
5,455
370 1,420 2,485
9,730
7-247
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Y14
2,780 3,100 5,425 11,305
Cost of
goods
$27,835
manufactured
(d) W12 + X13: $6,800 + $9,730 = $16,530
(e) Job Z15: Material ($4,050) + Labor ($1,080) + Overhead ($1,890) = $7,020
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 3 Hard
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-248
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
121.
Augusta 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, Augusta'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 Augusta 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.
Balance
Job No.
Direct
10/31 Materials
Direct Machine
Labor
Hours
X J-107
$118,600
$4,000 $8,400
150
ST-211
121,450
2,500 12,160
300
XD-108
21,800
86,400 36,650
3,100
SL-205
34,350
71,800 32,175
2,700
18,990 21,845
1,400
RX-115
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
7-249
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
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: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-250
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
122.
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)
Production
Departments
Manufacturing
Direct
Labor
overhead application
rates
Rate
Department 1
$12.00
Department 2
$18.00
Department 3
$15.00
50% of direct
materials
$8.00 per machine
hour
75% of direct labor
cost
Job 101 Job 102 Job 103
Beginning Work-inProcess
$25,500 $32,400
$-0-
Direct materials:
Department 1
$40,000 $26,000 $58,000
Department 2
$3,000 $5,000 $14,000
Department 3
$-0-
$-0-
$-0-
Department 1
500
400
300
Department 2
200
250
350
Department 3
1,500
1,800
2, 500
-0-
-0-
-0-
Direct labor hours:
Machine hours:
Department 1
7-251
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Department 2
1,200
1,500
2,700
Department 3
1,500
1,800
2,500
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:
Job 101 Job 102 Job 103
Beginning Work-inProcess
$25,500 $32,400
$0
Materials:
Department 1
40,000
26,000
58,000
Department 2
3,000
5,000
14,000
Department 1
6,000
4,800
3,600
Department 2
3,600
4,500
6,300
Department 3
22,500
27,000
37,500
Department 1
20,000
13,000
29,000
Department 2
9,600
12,000
21,600
Department 3
16,875
20,250
28,125
Labor:
Overhead:
Total
$147,075 $144,950 $198,125
7-252
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-253
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
123.
Kid's World 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. Kid's World Work-in-Process Inventory on April 30 consisted of the following
jobs:
Job No.
Items
Units
Accumulated Cost
CBSI02
Cribs
20,000
$900,000
PLP086
Playpens
15,000
420,000
DRS114 Dressers
25,000
250,000
Total
$1,570,000
Kid's World 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 Kid's World 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:
Materials
Purchased
Purchased
Parts
$242,000
$396,000
Job CBS102
51,000
104,000
Job PLP086
3,000
10,800
Job DRS114
124,000
87,000
62,000
81,000
65,000
187,000
Requisitions:
Job STR077 (10,000
strollers)
Job CRG096 (5,000
carriages)
During the month of May, Kid's World factory payroll consisted of the following:
7-254
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Hours
Cost
Job CBS102
12,000
$122,400
Job PLP086
4,400
43,200
Job DRS114
19,500
200,500
Job STR077
3,500
30,000
Job CRG096
14,000
138,000
Indirect supervision
Total
57,600
$591,700
Listed below are the jobs that were completed and the units that were sold during the month
of May.
Quantity
Job No.
Items
Completed
CBS102
Cribs
20,000
PLP086
Playpens
15,000
STR077
Strollers
10,000
CRG096
Carriages
5,000
Required:
(a) Compute the value of Kid's World Work-in-Process Inventory on May 31.
(b) Compute the value of Kid's World 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
7-255
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
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
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 3 Hard
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-256
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
124.
Halston 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.
(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: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
7-257
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-258
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
125.
The Focus 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:
Direct materials inventory
$24,000
Work-in-process inventory
9,000
Finished goods inventory
22,000
Manufacturing overhead control
33,000
Accounts payable
12,000
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.
7-259
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
(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: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-260
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
126.
Windham 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)
Direct
Production
Labor
Dept
Manufacturing overhead
application rate
Rate
Cutting
$14.00
40% of direct materials
Machining
$20.00
$10.00 per machine hour
Assembly
$22.00
80% of direct labor cost
Job 611 Job 612 Job 613
Beginning WIP
$52,500 $16,200
$-0-
Direct materials:
Cutting
50,000
32,000
76,000
Machining
4,000
7,000
19,000
Assembly
-0-
-0-
-0-
Cutting
500
400
600
Machining
800
750
850
Assembly
1,100
1,200
3,500
-0-
-0-
-0-
Machining
2,200
1,800
3,400
Assembly
500
800
750
Direct labor hours:
Machine hours:
Cutting
Required:
7-261
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
(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:
Job 611 Job 612 Job 613
Beginning Work-inprocess
$52,500 $16,200
$-0-
Materials:
Cutting
50,000
32,000
76,000
4,000
7,000
19,000
7,000
5,600
8,400
Machining
16,000
15,000
17,000
Assembly
24,200
26,400
77,000
Cutting
20,000
12,800
30,400
Machining
22,000
18,000
34,000
Assembly
19,360
21,120
61,600
Machining
Labor:
Cutting
Overhead:
Total
$215,060 $154,120 $323,400
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
7-262
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-263
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
127.
Carlson 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:
Direct materials
$60,000
WIP
190,000
Finished goods
250,000
Total
$500,000
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
(b) Cost of goods sold
$13,600
Manufacturing overhead
$13,600
control
(c) WIP
2,584
Finished goods
3,400
Cost of goods sold
7,616
Manufacturing overhead
control
$13,600
Feedback: (a) Rate = $266,400/18,500 = $14.40/hr; 19,050 hrs × $14.40 = $274,320
7-264
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
(b) Actual - applied = $287,920 - 274,320 = $13,600 underapplied
(c)
WIP
$190,000
.19
$2,584
FG
250,000
.25
3,400
COGS
560,000
.56
7,616
$1,000,000
$13,600
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-265
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
128.
Job 7890 was recently completed. The following data have been recorded on its job cost
sheet:
Direct materials
Direct labor-hours
Direct labor wage rate
Machine-hours
$45,000
630 labor-hours
$13 per labor-hour
390 machine-hours
Number of units completed
3,000 units
The company applies manufacturing overhead on the basis of machine-hours. The
predetermined overhead rate is $12 per machine-hour.
Required:
Compute the unit product cost that would appear on the job cost sheet for Job 7890.
Cost Summary
Direct materials
$45,000
Direct labor $13 per DLH × 630 DLHs
8,190
Manufacturing overhead $12 per MH × 390 MHs
4,680
Total cost
Unit product cost
$57,870
$19.29
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 1 Easy
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-266
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
129.
Job 5432 was recently completed. The following data have been recorded on its job cost
sheet:
Direct materials
$40,610
Direct labor-hours
Direct labor wage rate
1,147 DLHs
$11 per DLH
Number of units completed
3,100 units
The company applies manufacturing overhead on the basis of direct labor-hours. The
predetermined overhead rate is $20 per direct labor-hour.
Required:
Compute the unit product cost that would appear on the job cost sheet for Job 5432.
Cost Summary
Direct materials
$40,610
Direct labor $11 per DLH × 1,147 DLHs
Manufacturing overhead $20 per DLH ×
1,147 DLHs
Total cost
Unit product cost
12,617
22,940
$76,167
$24.57
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 1 Easy
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
7-267
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Topic: Computing the Cost of a Job
130.
Island 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: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-268
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
131.
Northface 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: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-269
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
132.
Yang 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: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-270
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
133.
Wang'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:
WIP
$150,000
Finished goods
375,000
Total
$525,000
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
(b) Manufacturing overhead control $4,170
Cost of goods sold
$4,170
(c) Manufacturing overhead control $4,170
WIP
500
Finished goods
1,251
Cost of goods sold
2,419
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
(c)
WIP
$150,000
.12
$500
7-271
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
FG
375,000
.30
1,251
COGS
725,000
.58
2,419
$1,250,000
$4,170
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
134.
Harkin Corporation bases its predetermined overhead rate on the estimated machine-hours for
the upcoming year. Data for the upcoming year appear below:
Estimated machine-hours
Estimated variable
manufacturing overhead
Estimated total fixed
manufacturing overhead
73,000
per
$3.49 machinehour
$838,770
Required:
Compute the company’s predetermined overhead rate.
Estimated total manufacturing overhead = $838,770 + ($3.49 per machine-hour × 73,000
machine-hours) = $1,093,540
Predetermined overhead rate = $1,093,540 ÷ 73,000 machine-hours = $14.98 per machinehour
AACSB: Analytical Thinking
7-272
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
AICPA: FN Measurement
Blooms: Apply
Difficulty: 1 Easy
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
135.
Hsu Corporation bases its predetermined overhead rate on the estimated labor-hours for the
upcoming year. At the beginning of the most recently completed year, the company estimated
the labor-hours for the upcoming year at 32,000 labor-hours. The estimated variable
manufacturing overhead was $7.17 per labor-hour and the estimated total fixed manufacturing
overhead was $584,320. The actual labor-hours for the year turned out to be 33,300 laborhours.
Required:
Compute the company's predetermined overhead rate for the recently completed year.
Estimated total manufacturing overhead = $584,320 + ($7.17 per machine-hour × 32,000
machine-hours) = $813,760
Predetermined overhead rate = $813,760 ÷ 32,000 machine-hours = $25.43 per labor-hour
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 1 Easy
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-273
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
136.
Ramos Corporation bases its predetermined overhead rate on the estimated labor-hours for
the upcoming year. Data for the most recently completed year appear below:
Estimates made at the
beginning of the year:
Estimated labor-hours
Estimated variable
manufacturing overhead
Estimated total fixed
manufacturing overhead
Actual labor-hours for the year
24,000
$6.86
per laborhour
$394,560
24,500
Required:
Compute the company's predetermined overhead rate for the recently completed year.
Estimated total manufacturing overhead = $394,560 + ($6.86 per labor-hour × 24,000 laborhours) = $559,200
Predetermined overhead rate = $559,200 ÷ 24,000 labor-hours = $23.30 per labor-hour
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 1 Easy
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-274
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
137.
Calvin Corporation bases its predetermined overhead rate on the estimated labor-hours for the
upcoming year. At the beginning of the most recently completed year, the company estimated
the labor-hours for the upcoming year at 13,000 labor-hours. The estimated variable
manufacturing overhead was $2.35 per labor-hour and the estimated total fixed manufacturing
overhead was $156,130.
Required:
Compute the company's predetermined overhead rate.
Estimated total manufacturing overhead = $156,130 + ($2.35 per labor-hour × 13,000 laborhours) = $186,680
Predetermined overhead rate = $186,680 ÷ 13,000 labor-hours = $14.36 per labor-hour
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 1 Easy
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-275
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
138.
In June, Robust Engineering worked on three contracts: 1,200 hours for Tico Company, 1,100
hours for Navel LLC and 3,400 for Lutron Corp. Robust 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
June 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, Robust 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 Robust make in June? Assume the over- or underapplied
overhead is not closed out each month.
(a) Tico: $120,000; Navel: $110,000; Lutron: $340,000
(b) $25,000 underapplied
(c) $42,000
Feedback:
(a)
Labor
Overhead
Total
$54,000
$66,000
$120,000
Navel
49,500
60,500
110,000
Lutron
153,000
187,000
340,000
$256,500
$313,500
$570,000
Tico
Total
(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
7-276
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
underapplied
(c)
Services
Billed
Tico
Navel
Lutron
Total
$180,000 $165,000 $510,000 $855,000
Cost of
Service
120,000 110,000 340,000 570,000
Provided
Gross
Margin
Marketing
& Admin.
Operating
Profit
$60,000 $55,000 $170,000 $285,000
243,000
$42,000
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-04 Apply job costing methods in service organizations.
Topic: Computing the Cost of a Job
7-277
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
139.
The Maryland 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 Maryland's operating profit for the year?
(1a) Materials inventory
$126,000
Accounts payable
(1b) WIP
Shop OH control
$126,000
110,880
9,500
Materials inventory
(1c) WIP
Shop OH control
120,380
165,000
22,200
Payroll
(1d) Shop OH control
187,200
139,600
7-278
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Assorted accounts
(1e)
WIP (5,500 hrs ×
29.1667)
139,600
160,417
Shop OH control
(1f) Cost of repair jobs
160,417
434,321
WIP
(1g) Accounts receivable
434,321
476,000
Sales revenue
(2) Cost of repair jobs
Shop OH control
476,000
10,883
10,883
(3) $30,976
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: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-04 Apply job costing methods in service organizations.
Topic: Computing the Cost of a Job
7-279
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
140.
Music Master Components produces parts for concert hall sound systems. The parts are
produced to specification by their customers, who pay either a fixed price (the price does not
depend directly on the cost of the job) or price equal to recorded cost plus a fixed fee (cost
plus). For the upcoming year (year 2), Music Master expects only two clients (Client 1 and
Client 2). The work done for Client 1 will all be done under fixed-price contracts while the work
done for Client 2 will all be done under cost-plus contracts.
Manufacturing overhead for year 2 is estimated to be $10 million. Other budgeted data for
year 2 include:
Machine Hours (thousands)
Direct Labor Costs ($000’s)
Client 1
Client 2
4,000
4,000
$5,000 $15,000
Required:
a. Compute the predetermined rate assuming that Music Master Components uses machinehours to apply overhead.
b. Compute the predetermined rate assuming that Music Master Components uses direct
labor cost to apply overhead.
c. Which allocation base will provide higher income for Music Master Components?
d. Is it ethical to choose an allocation method based on which one leads to higher income for
the firm?
a.
Application
rate:
$10,000
(4,000 + 4,000)
hours
= $1.25 per
machine hour
7-280
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
b.
Application
rate:
$10,000
($5,000 +
15,000)
= 50% of Directlabor cost
c. Using direct-labor cost as the base for applying overhead will lead to higher income for
Music Master Components. Because Client 2 pays on a cost-plus basis, Client 2 will be
charged for 150 percent (= $15,000 ÷ $10,000) of the manufacturing overhead. Using machine
hours as the base, Client 2 would be charged for 50 percent (= 4,000 ÷ 8,000).
d. This is a difficult question. In general, the result of the allocation process should not be the
justification for the allocation base. Ideally, the choice would be made based on which of the
two methods better reflected the "use" of the overhead. This is often not possible. Perhaps a
better resolution would be a more detailed allocation, using a two-stage allocation system, for
example.
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-05 Understand the ethical issues in job costing.
Topic: Ethical Issues and Job Costing
141.
What are characteristics of companies that are likely to use a job cost system?
Companies using a job order cost system are likely to be performing services or
manufacturing products according to specific customer orders and product specifications.
Construction contractors, manufacturers of special equipment, aircraft manufacturers, CPA
firms, attorneys, and hospitals all employ job order cost systems.
AACSB: Analytical Thinking
7-281
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
AICPA: FN Measurement
Blooms: Understand
Difficulty: 1 Easy
Gradable: manual
Learning Objective: 07-01 Explain what job and job shop mean.
Topic: Defining a Job
142.
Why is control of materials important from a managerial planning perspective?
If materials costs are not properly assigned to jobs, management may later be misled in
estimating the actual costs to complete future, similar jobs. Thus, profit planning may be in
error. Profitable jobs may be rejected because errors in cost assignments have made the jobs
look unprofitable or less profitable. If the company prepares bids on jobs, the bids may be in
error if they are based on the wrong costs.
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Topic: Computing the Cost of a Job
143.
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
over- or underapplied overhead can be prorated between work-in-process, finished goods,
and cost of goods sold.
AACSB: Analytical Thinking
AICPA: FN Measurement
7-282
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Blooms: Remember
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
144.
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: Analytical Thinking
AICPA: FN Measurement
Blooms: Remember
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
145.
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: Analytical Thinking
AICPA: FN Measurement
7-283
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Blooms: Remember
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
146.
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: Analytical Thinking
AICPA: FN Measurement
Blooms: Remember
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-04 Apply job costing methods in service organizations.
Topic: Computing the Cost of a Job
147.
Describe three possible unethical actions that can cause impropriety in job costing and give
examples.
1) Misstating the stage of completion; 2) charging costs to wrong jobs; 3) misrepresenting the
cost of jobs.
Students should expand on each of these three.
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-05 Understand the ethical issues in job costing.
7-284
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Topic: Ethical Issues and Job Costing
148.
ProBuild Contractors sells to government agencies using a cost-plus contract and to pri­vate
firms using fixed price contracts. What choices does ProBuild have in the design of its job
costing system that affect the cost of the government jobs?
ProBuild has choices to make about the allocation base and the cost pools used to
accumulate the overhead. This does not mean ProBuild can choose to do whatever it wants.
The government has a set of contracting rules and an audit agency to enforce the rules.
However, some interpretation is always required when classifying costs.
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-05 Understand the ethical issues in job costing.
Topic: Ethical Issues and Job Costing
7-285
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
149.
Melbourne Consultants works for only two clients: a large for-profit corporation and a small
environmental not-for-profit agency. The fee charged for work is based on cost. In deciding
how to allocate overhead, the CFO of Melbourne Consultants decides to use the base that
allocates the most cost to the large corporation. Is this ethical?
In general, the answer is that this is not ethical. Although the "correct" allocation basis is
subjective, it is difficult to justify the choice by the outcome. There might be other reasons,
such as more valuable employees or other resources are used on jobs for the larger company
or that the larger company, being more complex, requires more overhead resources.
However, the larger company might require fewer resources, because of economies of scale.
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Understand
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-05 Understand the ethical issues in job costing.
Topic: Ethical Issues and Job Costing
150.
In the context of job costing, what are projects? What additional costing issues are there with
projects?
Projects are complex jobs that often take months or years to complete. The status (costs and
progress) have to be evaluated at intervals during the project (before it is completed). Jobs
more typically take less time.
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Understand
Difficulty: 2 Medium
7-286
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Gradable: manual
Learning Objective: 07-06 Describe the difference between jobs and projects.
Topic: Managing Projects
7-287
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
151.
Santos Company is a manufacturing firm that uses job-order costing. At the beginning of the
year, the company's inventory balances were as follows:
Raw materials
$24,000
Work-in-Process
$73,000
Finished goods
$27,000
The company applies overhead to jobs using a predetermined overhead rate based on
machine-hours. At the beginning of the year, the company estimated that it would work 45,000
machine-hours and incur $180,000 in manufacturing overhead cost. The following transactions
were recorded for the year:
a. Raw materials were purchased, $416,000.
b. Raw materials were requisitioned for use in production, $420,000 ($380,000 direct and
$40,000 indirect).
c. The following employee costs were incurred: direct labor, $414,000; indirect labor, $60,000;
and administrative salaries, $212,000.
d. Selling costs, $141,000.
e. Factory utility costs, $20,000.
f. Depreciation for the year was $81,000 of which $73,000 is related to factory operations and
$8,000 is related to selling, general, and administrative activities.
g. Manufacturing overhead was applied to jobs. The actual level of activity for the year was
48,000 machine-hours.
h. The cost of goods manufactured for the year was $1,004,000.
i. Sales for the year totaled $1,416,000 and the costs on the job cost sheets of the goods that
were sold totaled $989,000.
j. The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold.
Required:
Prepare the appropriate journal entry for each of the items above (a. through j.). You can
assume that all transactions with employees, customers, and suppliers were conducted in
cash.
7-288
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
a. Raw Materials Inventory
416,000
Cash
416,000
b. Work-in-Process Inventory
380,000
Manufacturing Overhead
40,000
Raw Materials Inventory
420,000
c. Work-in-Process Inventory
414,000
Manufacturing Overhead
60,000
Administrative Salary
Expense
212,000
Cash
d. Selling Expenses
686,000
141,000
Cash
e. Manufacturing Overhead
141,000
20,000
Cash
20,000
f. Manufacturing Overhead
73,000
Depreciation Expense
8,000
Accumulated
81,000
Depreciation
g. Work-in-Process
192,000
Manufacturing
192,000
Overhead
h. Finished Goods
1,004,000
Work-in-Process
i. Cash
1,004,000
1,416,000
Sales
Cost of Goods Sold
1,416,000
989,000
7-289
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Finished Goods
j. Cost of Goods Sold
Manufacturing
Overhead
989,000
1,000
1,000
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-290
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
152.
Cherry Company is a manufacturing firm that uses job-order costing. The company's inventory
balances were as follows at the beginning and end of the year:
Beginning
Balance
Ending Balance
Raw materials
$11,000
$15,000
Work-in-Process
$32,000
$14,000
$108,000
$123,000
Finished goods
The company applies overhead to jobs using a predetermined overhead rate based on
machine-hours. At the beginning of the year, the company estimated that it would work 17,000
machine-hours and incur $272,000 in manufacturing overhead cost. The following transactions
were recorded for the year:
• Raw materials were purchased, $416,000.
• Raw materials were requisitioned for use in production, $412,000 ($376,000 direct and
$36,000 indirect).
• The following employee costs were incurred: direct labor, $330,000; indirect labor, $69,000;
and administrative salaries, $157,000.
• Selling costs, $113,000.
• Factory utility costs, $29,000.
• Depreciation for the year was $121,000 of which $114,000 is related to factory operations
and $7,000 is related to selling, general, and administrative activities.
• Manufacturing overhead was applied to jobs. The actual level of activity for the year was
15,000 machine-hours.
• Sales for the year totaled $1,282,000.
Required:
a. Prepare a schedule of cost of goods manufactured in good form.
b. Was the overhead underapplied or overapplied? By how much?
c. Prepare an income statement for the year in good form. The company closes any
underapplied or overapplied overhead to Cost of Goods Sold.
7-291
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
a. Schedule of cost of goods manufactured
Estimated total manufacturing overhead
(a)
$272,000
Estimated total machine-hours (b)
17,000
Predetermined overhead rate (a) ÷ (b)
$16.00
Actual total machine-hours (a)
15,000
Predetermined overhead rate (b)
$16.00
Overhead applied (a) × (b)
$240,000
Direct materials:
Raw materials inventory, beginning
$11,000
Add: purchases of raw materials
416,000
Total raw materials available
427,000
Deduct: raw materials inventory,
ending
Raw materials used in production
Less: indirect materials
15,000
412,000
36,000
Direct materials
376,000
Direct labor
330,000
Manufacturing overhead applied
240,000
Total manufacturing costs
946,000
Add: Beginning Work-in-Process
inventory
32,000
978,000
Deduct: Ending Work-in-Process
14,000
7-292
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
inventory
Cost of goods manufactured
$964,000
b. Overhead underapplied or overapplied
Actual manufacturing overhead cost
incurred:
Indirect materials
$36,000
Indirect labor
69,000
Factory utilities
29,000
Factory depreciation
114,000
Manufacturing overhead cost incurred
248,000
Manufacturing overhead applied
240,000
Underapplied overhead
$8,000
c. Income Statement
Beginning finished goods
inventory
Cost of goods manufactured
Cost of goods available for
sale
Ending finished goods
inventory
Unadjusted cost of goods
sold
Add: underapplied overhead
Adjusted cost of goods sold
Sales
Cost of goods sold
(adjusted)
$108,000
964,000
1,072,000
123,000
949,000
8,000
$957,000
$1,282,000
957,000
7-293
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Gross margin
325,000
Selling and administrative
expenses:
Administrative salaries
$157,000
Selling costs
113,000
Depreciation
7,000
Operating income
277,000
$48,000
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-294
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
153.
Dickerson Corporation has provided the following data for the month of April:
Inventories:
Beginning
Ending
Raw materials
$21,000
$35,000
Work-in-Process
$17,000
$19,000
Finished goods
$46,000
$38,000
Additional information:
Raw materials purchases
$76,000
Direct labor cost
$81,000
Manufacturing overhead cost incurred
$42,000
Indirect materials included in
manufacturing overhead cost incurred
Manufacturing overhead cost applied to
Work-in-Process
$6,000
$44,000
Required:
Prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold in
good form.
Cost of Goods Manufactured
Direct materials
Beginning materials inventory $21,000
Add: Purchases of raw
materials
Raw materials available for
use
Deduct: Ending raw materials
76,000
97,000
35,000
7-295
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
inventory
Raw materials used in
production
62,000
Less indirect materials
included in manufacturing
6,000 $56,000
overhead incurred
Direct labor
Manufacturing overhead
applied to Work-in-Process
Total manufacturing costs
Add: Beginning Work-inProcess inventory
81,000
44,000
181,000
17,000
198,000
Deduct: Ending Work-inProcess inventory
Cost of goods manufactured
19,000
$179,000
Cost of Goods Sold
Beginning finished goods inventory
$46,000
Add: Cost of goods manufactured
179,000
Cost of goods available for sale
225,000
Deduct: Ending finished goods inventory
38,000
Unadjusted cost of goods sold
187,000
Deduct: Overapplied overhead
2,000
Adjusted cost of goods sold
$185,000
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
7-296
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Topic: Computing the Cost of a Job
7-297
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
154.
Townley Inc. has provided the following data for the month of February. There were no
beginning inventories; consequently, the direct materials, direct labor, and manufacturing
overhead applied listed below are all for the current month.
WorkinProcess
Direct
materials
Direct labor
Finished
Goods
Cost of
Goods
Total
Sold
$7,570 $19,200 $35,280 $62,050
8,810
24,000
44,100
76,910
8,320
15,600
28,080
52,000
Manufacturing
overhead
applied
Total
$24,700 $58,800 $107,460 $190,960
Manufacturing overhead for the month was overapplied by $3,000.
The company allocates any underapplied or overapplied overhead among Work-in-Process,
finished goods, and cost of goods sold at the end of the month on the basis of the overhead
applied during the month in those accounts.
Required:
Provide the journal entry that would record the allocation of underapplied or overapplied
among Work-in-Process, finished goods, and cost of goods sold.
Overhead applied in Work-inProcess
$8,320 16%
Overhead applied in finished goods
15,600 30%
Overhead applied in cost of goods
28,080 54%
7-298
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
sold
Total overhead applied
Manufacturing Overhead
$52,000 100%
3,000
Work-in-Process (16% × $3,000)
480
Finished Goods (30% × $3,000)
900
Cost of Goods Sold (54% ×
$3,000)
1,620
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-299
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
155.
Ardvark Inc. has provided the following data for the month of November. There were no
beginning inventories; consequently, the direct materials, direct labor, and manufacturing
overhead applied listed below are all for the current month.
WorkinProcess
Direct
Finished
Goods
Cost of
Goods
Total
Sold
$3,500 $11,200 $51,800 $66,500
materials
Direct labor
3,260
14,400
66,600
84,260
3,840
7,680
36,480
48,000
Manufacturing
overhead
applied
Total
$10,600 $33,280 $154,880 $198,760
Manufacturing overhead for the month was underapplied by $6,000.
The company allocates any underapplied or overapplied overhead among Work-in-Process,
finished goods, and cost of goods sold at the end of the month on the basis of the overhead
applied during the month in those accounts.
Required:
Determine the cost of Work-in-Process, finished goods, and cost of goods sold AFTER
allocation of the underapplied or overapplied overhead for the period.
WorkinProcess
Finished
Goods
Cost of
Goods
Total
Sold
Total cost
7-300
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
before
$10,600 $33,280 $154,880 $198,760
allocation of
underapplied
overhead
Allocation
percentage
based on
overhead
8%
16%
76%
100%
$480
$960
$4,560
$6,000
applied
during the
month
Allocation of
underapplied
overhead
Total cost
after
allocation of
underapplied $11,080 $34,240 $159,440 $204,760
overhead
AACSB: Analytical Thinking
AICPA: BB Critical Thinking
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-02 Assign costs in a job cost system.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-301
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
156.
The management of Satellite Corporation would like to investigate the possibility of basing its
predetermined overhead rate on activity at capacity rather than on the estimated amount of
activity for the year. The company's controller has provided an example to illustrate how this
new system would work. In this example, the allocation base is machine-hours and the
estimated amount of the allocation base for the upcoming year is 13,000 machine-hours. In
addition, capacity is 16,000 machine-hours and the actual activity for the year is 12,900
machine-hours. All of the manufacturing overhead is fixed and is $29,120 per year. For
simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well
as the manufacturing overhead at capacity and the actual amount of manufacturing overhead
for the year.
Required:
a. Determine the predetermined overhead rate if the predetermined overhead rate is based on
the amount of the allocation base at capacity.
b. Determine the underapplied or overapplied overhead for the year if the predetermined
overhead rate is based on the amount of the allocation base at capacity.
Calculation of the
a. predetermined overhead
rate:
Estimated total
manufacturing overhead $29,120
at capacity
Total amount of the
allocation base at
16,000 MHs
capacity
Predetermined overhead
rate
$1.82 per MH
7-302
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Calculation of overhead
b. underapplied or
overapplied:
Actual manufacturing
overhead cost incurred
$29,120
Manufacturing overhead
applied to jobs:
Predetermined
overhead rate
Actual hours
Manufacturing overhead
applied to jobs
$1.82 per MH
12,900 MHs
$23,478
Underapplied
(overapplied)
$5,642 Underapplied
manufacturing overhead
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-303
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
157.
The management of Atlas Corporation would like to investigate the possibility of basing its
predetermined overhead rate on activity at capacity rather than on the estimated amount of
activity for the year. The company's controller has provided an example to illustrate how this
new system would work. In this example, the allocation base is machine-hours and the
estimated amount of the allocation base for the upcoming year is 19,000 machine-hours. In
addition, capacity is 21,000 machine-hours and the actual activity for the year is 18,200
machine-hours. All of the manufacturing overhead is fixed and is $71,820 per year. For
simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well
as the manufacturing overhead at capacity and the actual amount of manufacturing overhead
for the year.
Required:
a. Determine the predetermined overhead rate if the predetermined overhead rate is based on
the estimated amount of the allocation base.
b. Determine the underapplied or overapplied overhead for the year if the predetermined
overhead rate is based on the estimated amount of the allocation base.
c. Determine the predetermined overhead rate if the predetermined overhead rate is based on
the amount of the allocation base at capacity.
d. Determine the underapplied or overapplied overhead for the year if the predetermined
overhead rate is based on the amount of the allocation base at capacity.
Calculation of the
a. predetermined overhead
rate:
Estimated total
manufacturing overhead
Estimated total amount
$71,820
19,000 MHs
7-304
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
of the allocation base
Predetermined overhead
rate
$3.78 per MH
Calculation of overhead
b. underapplied or
overapplied:
Actual manufacturing
overhead cost
$71,820
Manufacturing overhead
applied to jobs:
Predetermined
overhead rate
Actual hours
Manufacturing overhead
applied to jobs
$3.78 per MH
18,200 MHs
$68,796
Underapplied
(overapplied)
$3,024 Underapplied
manufacturing overhead
Calculation of the
c. predetermined overhead
rate:
Estimated total
manufacturing overhead $71,820
at capacity
Total amount of the
allocation base at
21,000 MHs
capacity
Predetermined overhead
rate
$3.42 per MH
Calculation of overhead
d. underapplied or
overapplied:
7-305
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Actual manufacturing
overhead cost incurred
$71,820
Manufacturing overhead
applied to jobs:
Predetermined
overhead rate
Actual hours
Manufacturing overhead
applied to jobs
$3.42 per MH
18,200 MHs
$62,244
Underapplied
(overapplied)
$9,576 Underapplied
manufacturing overhead
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-306
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
158.
The management of Grainger Corporation would like to investigate the possibility of basing its
predetermined overhead rate on activity at capacity rather than on the estimated amount of
activity for the year. The company's controller has provided an example to illustrate how this
new system would work. In this example, the allocation base is machine-hours and the
estimated amount of the allocation base for the upcoming year is 48,000 machine-hours. In
addition, capacity is 53,000 machine-hours and the actual activity for the year is 47,700
machine-hours. All of the manufacturing overhead is fixed and is $1,144,800 per year. For
simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well
as the manufacturing overhead at capacity and the actual amount of manufacturing overhead
for the year. Job SUA-600, which required 40 machine-hours, is one of the jobs worked on
during the year.
Required:
a. Determine the predetermined overhead rate if the predetermined overhead rate is based on
the estimated amount of the allocation base.
b. Determine how much overhead would be applied to Job SUA-600 if the predetermined
overhead rate is based on estimated amount of the allocation base.
c. Determine the underapplied or overapplied overhead for the year if the predetermined
overhead rate is based on the estimated amount of the allocation base.
d. Determine the predetermined overhead rate if the predetermined overhead rate is based on
the amount of the allocation base at capacity.
e. Determine how much overhead would be applied to Job SUA-600 if the predetermined
overhead rate is based on the amount of the allocation base at capacity.
f. Determine the underapplied or overapplied overhead for the year if the predetermined
overhead rate is based on the amount of the allocation base at capacity.
7-307
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Calculation of the
a. predetermined
overhead rate:
Estimated total
manufacturing
$1,144,800
overhead
Estimated total
amount of the
48,000 MHs
allocation base
Predetermined
overhead rate
$23.85 per MH
Manufacturing
b. overhead applied to
Job J42O
Number of hours for
the job
Predetermined
overhead rate
40 MHs
$23.85 per MH
Manufacturing
overhead applied to
$954.00
the job
Calculation of
c.
overhead
underapplied or
overapplied:
Actual manufacturing
overhead cost
$1,144,800
Manufacturing
overhead applied to
jobs:
7-308
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Predetermined
overhead rate
Actual hours
$23.85 per MH
47,700 MHs
Manufacturing
overhead applied to
$1,137,645
jobs
Underapplied
(overapplied)
manufacturing
$7,155 Underapplied
overhead
Calculation of the
d. predetermined
overhead rate:
Estimated total
manufacturing
$1,144,800
overhead at capacity
Total amount of the
allocation base at
53,000 MHs
capacity
Predetermined
overhead rate
$21.60 per MH
Manufacturing
e. overhead applied to
Job J42O:
Number of hours for
the job
Predetermined
overhead rate
40 MHs
$21.60 per MH
Manufacturing
overhead applied to
$864.00
the job
f. Calculation of
7-309
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
overhead
underapplied or
overapplied:
Actual manufacturing
overhead cost
$1,144,800
incurred
Manufacturing
overhead applied to
jobs:
Predetermined
overhead rate
Actual hours
$21.60 per MH
47,700 MHs
Manufacturing
overhead applied to
$1,030,320
jobs
Underapplied
(overapplied)
manufacturing
$114,480 Underapplied
overhead
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-310
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
159.
The management of Royal Corporation would like to investigate the possibility of basing its
predetermined overhead rate on activity at capacity rather than on the estimated amount of
activity for the year. The company's controller has provided an example to illustrate how this
new system would work. In this example, the allocation base is machine-hours and the
estimated amount of the allocation base for the upcoming year is 70,000 machine-hours. In
addition, capacity is 82,000 machine-hours and the actual activity for the year is 72,900
machine-hours. All of the manufacturing overhead is fixed and is $4,132,800 per year. For
simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well
as the manufacturing overhead at capacity and the actual amount of manufacturing overhead
for the year. Job 706H, which required 300 machine-hours, is one of the jobs worked on
during the year.
Required:
a. Determine the predetermined overhead rate if the predetermined overhead rate is based on
the amount of the allocation base at capacity.
b. Determine how much overhead would be applied to Job 706H if the predetermined
overhead rate is based on the amount of the allocation base at capacity.
c. Determine the underapplied or overapplied overhead for the year if the predetermined
overhead rate is based on the amount of the allocation base at capacity.
Calculation of the
a. predetermined overhead
rate:
Estimated total
manufacturing overhead
$4,132,800
at capacity
Total amount of the
82,000 MHs
7-311
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
allocation base at capacity
Predetermined overhead
rate
b.
$50.40 per MH
Manufacturing overhead
applied to Job O65A:
Number of hours for the
job
Predetermined overhead
rate
Manufacturing overhead
applied to the job
300 MHs
$50.40 per MH
$15,120.00
Calculation of overhead
c. underapplied or
overapplied:
Actual manufacturing
overhead cost incurred
$4,132,800
Manufacturing overhead
applied to jobs:
Predetermined
overhead rate
Actual hours
Manufacturing overhead
applied to jobs
$50.40 per MH
72,900 MHs
$3,674,160
Underapplied
(overapplied)
manufacturing overhead
$458,640
Underapplied
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
7-312
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-313
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
160.
The management of Philly Corporation would like to investigate the possibility of basing its
predetermined overhead rate on activity at capacity rather than on the estimated amount of
activity for the year. The company's controller has provided an example to illustrate how this
new system would work. In this example, the allocation base is machine-hours and the
estimated amount of the allocation base for the upcoming year is 37,000 machine-hours. In
addition, capacity is 46,000 machine-hours and the actual activity for the year is 36,900
machine-hours. All of the manufacturing overhead is fixed and is $697,820 per year. For
simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well
as the manufacturing overhead at capacity and the actual amount of manufacturing overhead
for the year.
Required:
a. Determine the underapplied or overapplied overhead for the year if the predetermined
overhead rate is based on the estimated amount of the allocation base.
b. Determine the underapplied or overapplied overhead for the year if the predetermined
overhead rate is based on the amount of the allocation base at capacity.
Calculation of the
a. predetermined
overhead rate:
Estimated total
manufacturing
$697,820
overhead
Estimated total amount
of the allocation base
Predetermined
overhead rate
37,000 MHs
$18.86 per MH
Calculation of overhead
7-314
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
underapplied or
overapplied:
Actual manufacturing
overhead cost
$697,820
Manufacturing
overhead applied to
jobs:
Predetermined
overhead rate
Actual hours
$18.86 per MH
36,900 MHs
Manufacturing
overhead applied to
$695,934
jobs
Underapplied
(overapplied)
manufacturing
$1,886 Underapplied
overhead
Calculation of the
b. predetermined
overhead rate:
Estimated total
manufacturing
$697,820
overhead at capacity
Total amount of the
allocation base at
46,000 MHs
capacity
Predetermined
overhead rate
$15.17 per MH
Calculation of overhead
underapplied or
overapplied:
Actual manufacturing
$697,820
7-315
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
overhead cost incurred
Manufacturing
overhead applied to
jobs:
Predetermined
overhead rate
Actual hours
$15.17 per MH
36,900 MHs
Manufacturing
overhead applied to
$559,773
jobs
Underapplied
(overapplied)
manufacturing
$138,047 Underapplied
overhead
AACSB: Analytical Thinking
AICPA: FN Measurement
Blooms: Apply
Difficulty: 2 Medium
Gradable: manual
Learning Objective: 07-03 Account for overhead using predetermined rates.
Topic: Computing the Cost of a Job
7-316
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.