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Exam 2: Job Order Costing and Analysis

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Question 41

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Job cost sheets include both product and period costs.

A) True
B) False

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Question 42

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Overapplied overhead is the amount by which actual overhead cost exceeds the overhead applied to products during the period.

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B) False

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Question 43

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A company charged the following amounts of overhead to jobs during the current year: $12,000 to jobs still in process, $42,000 to jobs completed but not sold, and $66,000 to jobs finished and sold. At year-end, the company's Factory Overhead account has a credit balance of $9,000, which is not a material amount. What entry (if any) should the company make at year-end related to this overhead balance?

Briefly describe how manufacturing firms dispose of overapplied or underapplied factory overhead.

The job order cost sheets used by Greene Company revealed the following: Job No. 135 was completed during May and Jobs No. 134 and 135 were shipped to customers in May. What was the company's cost of goods sold for May and the Work in Process inventory on May 31?

Service firms, unlike manufacturing firms, should only use actual costs when determining a selling price for their services.

The following information is available for the Annum Corporation for the current year: Annum Company uses a predetermined overhead rate of 150% of direct labor cost. Prepare journal entries for the following transactions and events: (a) Purchase of raw materials on account. (b) Assignment of materials costs to Work in Process Inventory and Factory Overhead. (c) Assignment of Factory Payroll to Work in Process Inventory and Factory Overhead. (d) Recording of other factory overhead. Assume that all items other than depreciation are paid in cash. (e) Assignment of Factory Overhead to Work in Process Inventory. (f) Transfer of goods completed to Finished Goods Inventory. (g) Recording cost of goods sold. (h) Assignment of over- or underapplied overhead to Cost of Goods Sold.

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

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

Copy Center pays an average wage of $12 per hour to employees for printing and copying jobs, and allocates $18 of overhead for each employee hour worked. Materials are assigned to each job according to actual cost. Jobs are marked up 20% above cost to determine the selling price. If Job M-47 used $350 of materials and took 20 hours of labor to complete, what is the selling price of the job?

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

A time ticket is a source document that an employee uses to report how much indirect labor was performed for a job and is used to determine the amount of direct labor to charge to the job.

Calwell Corp. uses a job order costing system. Four jobs were started during the current year. The following is a record of the costs incurred: $\begin{array}{|r|r|r|r|}\hline \text { Job \# } & \begin{array}{c}\text { Material } \\\text { Used }\end{array} & \begin{array}{c}\text { Direct Labor } \\\text { Used }\end{array} & \begin{array}{c}\text { Direct Labor } \\\text { Hours Used }\end{array} \\\hline 1010 & \$ 45,000 & \$ 72,000 & 8,000 \\\hline 1011 & 59,000 & 77,000 & 7,000 \\\hline 1012 & 35,000 & 30,000 & 3,000 \\\hline 1013 & 26,000 & 40,000 & 5,000\\\hline\end{array}$ Actual overhead costs were $55,800. The predetermined overhead rate is $2.40 per direct labor hour. During the year, Jobs 1010, 1012, and 1013 were completed. Also, Jobs 1010 and 1013 were sold for $387,000. Assuming that this is Calwell's first year of operations: (a) Make the necessary journal entries to charge the costs to the jobs started and to record the completion and sale of finished jobs. (b) Calculate the balance in the Work in Process Inventory, Finished Goods Inventory, and Factory Overhead accounts. Does the Factory Overhead account balance indicate an over- or underapplied overhead?

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

Minstrel Manufacturing uses a job order costing system. During one month, Minstrel purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, of which $40,000 was indirect labor. Minstrel uses a predetermined overhead rate of 150% of direct labor cost. The total manufacturing costs added during the period are:

In a job order costing system, any immaterial underapplied overhead at the end of the period can be charged entirely to Cost of Goods Sold.

Overapplied or underapplied overhead should be removed from the Factory Overhead account at the end of each accounting period.

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

The predetermined overhead rate for Foster, Inc., is based on estimated direct labor costs of $400,000 and estimated factory overhead of $500,000. Actual costs incurred were: (a) Calculate the predetermined overhead rate and calculate the overhead applied during the year. (b) Determine the amount of over- or underapplied overhead and prepare the journal entry to eliminate the over- or underapplied overhead assuming that it is not material in amount.

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