Chapter 3
Systems Design: Job-Order Costing
True/False 1.
T Easy
Job-order costing would be more likely to be used than process costing in situations where many different products or services are produced each period to customer specifications.
2. F Easy
Job-order costing is used in manufacturing companies and process costing is used in service firms.
3. F Easy
In a job-order costing system, costs are traced to departments and then allocated to units of product using an average process.
4. F Medium
Normally a job cost sheet is not prepared for a job until after the job has been completed.
5. F Easy
Job cost sheets contain entries for actual direct material, actual direct labor, and actual manufacturing overhead cost incurred in completing a job.
6. F Medium
In order to improve the accuracy of unit costs, most companies recompute the predetermined overhead rate each month.
7. T Medium
The following journal entry would be made to apply overhead cost to jobs in a job-order costing system:
Work in Process ... XXX Manufacturing Overhead ... XXX 8.
T Easy
When the predetermined overhead rate is based on direct labor-hours, the amount of overhead applied to a job is proportional to the amount of actual direct labor-hours incurred on the job.
9. F Medium
When completed goods are sold the transaction is recorded as a debit to Cost of Goods Sold and a credit to Work in Process.
10.
Medium 14. T Easy
Indirect materials are not charged to a specific job but rather are included in manufacturing overhead.
15. T Easy
The labor time ticket contains a detailed summary of the direct and the indirect labor hours of an employee.
Multiple Choice 16.
B Easy
Which of the following companies would be most likely to use a job-order costing system rather than a process costing system?
a. fast food restaurant b. shipbuilding
c. crude oil refining d. candy making 17. B Easy CMA adapted
The computation of unit product costs involves an averaging process in:
Job-order costing Process costing a. Yes No b. Yes Yes c. No Yes d. No No 18. A Easy
Work in Process is a control account supported by detailed cost data contained in:
a. job cost sheets.
b. the Manufacturing Overhead account. c. the Finished Goods inventory account. d. purchase requisitions.
19. D Medium
In job-order costing, all of the following statements are correct with respect to labor time and cost except:
a. time tickets are kept by employees showing the amount of work on specific jobs.
b. the job cost sheet for a job will contain all direct labor charges to that particular job.
c. labor cost that can be traced to a job only with a great deal of effort is treated as part of manufacturing overhead.
d. a machine operator performing routine annual maintenance work on a piece of equipment would charge the maintenance time to a
specific job. 20.
A Medium
In a job order cost system, the journal entry to record the application of overhead cost to jobs would include:
a. a credit to the Manufacturing Overhead account. b. a credit to the Work in Process inventory account. c. a debit to Cost of Goods Sold.
d. a debit to the Manufacturing Overhead account. 21.
C Medium
In a job-order cost system, the use of indirect materials would usually be recorded as a debit to:
a. Raw Materials. b. Work in Process.
c. Manufacturing Overhead. d. Finished Goods.
22. A Easy CPA adapted
In a job order cost system, the use of direct materials previously purchased usually is recorded as a debit to:
a. Work in Process inventory. b. Finished Goods inventory. c. Manufacturing Overhead. d. Raw Materials inventory. 23.
D Easy
In a job-order cost system, direct labor costs usually are recorded initially with a debit to:
a. Manufacturing Overhead. b. Finished Goods inventory. c. Direct Labor Expense. d. Work in Process. 24.
A Medium
If a company applies overhead to jobs on the basis of a predetermined overhead rate, a credit balance in the Manufacturing Overhead account at the end of any period means that:
a. more overhead cost has been charged to jobs than has been incurred during the period.
b. more overhead cost has been incurred during the period than has been charged to jobs.
c. the amount of overhead cost charged to jobs is greater than the estimated cost for the period.
d. the amount of overhead cost charged to jobs is less than the estimated overhead cost for the period.
25. D Medium
In a job order cost system, the amount of overhead cost that has been applied to a job that remains incomplete at the end of a period: a. is deducted on the Income Statement as overapplied overhead. b. is closed to Cost of Goods Sold.
c. is transferred to Finished Goods at the end of the period.
d. is part of the ending balance of the Work in Process inventory account.
26. B Hard
The Work in Process inventory account of a manufacturing company shows a balance of P2,400 at the end of an accounting period. The job cost sheets of the two uncompleted jobs show charges of P400 and P200 for direct materials, and charges of P300 and P500 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. 80%. b. 125%. c. 300%. d. 240%. 27. C Medium
Freeman Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. At the beginning of the year, the company estimated manufacturing overhead would be P150,000 and direct labor hours would be 10,000. The actual figures for the year were P186,000 for manufacturing overhead and 12,000 direct labor hours. The cost records for the year will show: a. overapplied overhead of P30,000. b. underapplied overhead of P30,000. c. underapplied overhead of P6,000. d. overapplied overhead of P6,000. 28. B Medium
Harrell Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. At the beginning of the year the company estimated its total manufacturing overhead cost at P400,000 and its direct labor-hours at 100,000 hours. The actual overhead cost incurred during the year was P350,000 and the actual direct labor hours incurred on jobs during the year was 90,000 hours. The manufacturing overhead for the year would be:
a. P10,000 underapplied. b. P10,000 overapplied. c. P50,000 underapplied. d. P50,000 overapplied.
29. A Hard
For the current year, Paxman Company incurred P150,000 in actual manufacturing overhead cost. The Manufacturing Overhead account showed that overhead was overapplied in the amount of P6,000 for the year. If the predetermined overhead rate was P8.00 per direct labor hour, how many hours were worked during the year?
a. 19,500 hours b. 18,000 hours c. 18,750 hours d. 17,750 hours 30. B Medium CPA adapted
Carlo Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. The company estimated manufacturing overhead at P255,000 for the year and direct labor-hours at 100,000 hours. Actual manufacturing overhead costs incurred during the year totaled P270,000. Actual direct labor hours were 105,000. What was the overapplied or underapplied overhead for the year? a. P2,250 overapplied. b. P2,250 underapplied. c. P15,000 overapplied. d. P15,000 underapplied. 31. D Medium
Sawyer Manufacturing Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. Last year, the company worked 57,000 actual direct labor hours and incurred P345,000 of actual manufacturing overhead cost. The Company had estimated that it would work 55,000 direct labor hours during the year and incur P330,000 of manufacturing overhead cost. The company's manufacturing overhead cost for the year was:
a. overapplied by P15,000. b. underapplied by P15,000. c. overapplied by P3,000. d. underapplied by P3,000. 32. D Easy
The Watts Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A and on machine hours in Dept. B. At the beginning of the year, the company made the following estimates: Dept. A Dept. B
Direct labor cost ... P30,000 P40,000 Manufacturing overhead ... 60,000 50,000 Direct labor hours ... 6,000 8,000 Machine hours ... 2,000 10,000
What predetermined overhead rates would be used in Dept A and Dept B, respectively?
a. 50% and P8.00 b. 50% and P5.00 c. P15 and 110% d. 200% and P5.00
33. C Easy
Compton Company uses a predetermined overhead rate in applying overhead to production orders on a labor cost basis in Department A and on a machine hours basis in Department B. At the beginning of the most recently completed year, the company made the following estimates: Dept. A Dept. B
Direct labor cost ... P56,000 P33,000 Factory overhead ... 67,200 45,000 Direct labor hours ... 8,000 9,000 Machine hours ... 4,000 15,000
What predetermined overhead rate would be used in Department A and Department B, respectively? a. 83% and P5 b. 83% and P3 c. 120% and P3 d. 83% and P3 34. C Medium
Kelsh Company uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for next year:
Direct materials ... P10,000 Direct labor ... 30,000 Sales commissions ... 40,000 Salary of production supervisor ... 20,000 Indirect materials ... 4,000 Advertising expense ... 8,000 Rent on factory equipment ... 10,000
Kelsh estimates that 5,000 direct labor hours and 10,000 machine hours will be worked during the year. The predetermined overhead rate per hour will be:
a. P6.80. b. P6.40. c. P3.40. d. P8.20.
35. D Medium
Simplex Company has the following estimated costs for next year: Direct materials ... P15,000
Direct labor ... 55,000 Sales commissions ... 75,000 Salary of production supervisor ... 35,000 Indirect materials ... 5,000 Advertising expense ... 11,000 Rent on factory equipment ... 16,000
Simplex estimates that 10,000 direct labor and 16,000 machine hours will be worked during the year. If overhead is applied on the basis of machine hours, the overhead rate per hour will be:
a. P8.56. b. P7.63. c. P6.94. d. P3.50. 36. A Medium
CR Company has the following estimated costs for the next year: Direct materials ... P 4,000
Direct labor ... 20,000 Rent on factory building ... 15,000 Sales salaries ... 25,000 Depreciation on factory equipment .... 8,000 Indirect labor ... 10,000 Production supervisor’s salary ... 12,000
CR Company estimates that 20,000 labor hours will be worked during the year. If overhead is applied on the basis of direct labor hours, the overhead rate per hour will be:
a. P2.25. b. P3.25. c. P3.45. d. P4.70. 37. D Medium
Lucy Sportswear manufactures a specialty line of T-shirts. The company uses a job-order costing system. During March, the following costs were incurred on Job ICU2: direct materials P13,700 and direct labor P4,800. In addition, selling and shipping costs of P7,000 were
incurred on the job. Manufacturing overhead was applied a the rate of P25 per machine-hour and Job ICU2 required 800 machine-hours. If Job ICU2 consisted of 7,000 shirts, the Cost of Goods Sold per shirt was: a. P6.50
b. P6.00 c. P5.70 d. P5.50
38. B Hard CPA adapted
Lucas Co. has a job order cost system. For the month of April, the following debits (credits) appeared in the Work in Process account: April 1 Balance ... P 24,000 30 Direct materials ... 80,000 30 Direct labor ... 60,000 30 Manufacturing overhead ... 54,000 30 To finished goods ... (200,000)
Lucas applies overhead at a predetermined rate of 90% of direct labor cost. Job No. 100, the only job still in process at the end of April, has been charged with manufacturing overhead of P4,500. The amount of direct materials charged to Job No. 100 was:
a. P18,000. b. P8,500. c. P5,000. d. P4,500. 39. C Hard CPA adapted
Worrell Corporation has a job-order cost system. The following debits (credits) appeared in the Work in Process account for the month of March:
March 1, balance ... P 12,000 March 31, direct materials ... 40,000 March 31, direct labor ... 30,000 March 31, manufacturing overhead applied 27,000 March 31, to finished goods ... (100,000)
Worrell applies overhead at a predetermined rate of 90% of direct labor cost. Job No. 232, the only job still in process at the end of March, has been charged with manufacturing overhead of P2,250. What was the amount of direct materials charged to Job No. 232?
a. P2,250 b. P2,500 c. P4,250 d. P9,000
40. D Medium
The Samuelson Company uses a job-order cost system. The following data were recorded for June:
June 1 Added During June Work in Process Direct Direct Job Number Inventory Materials Labor 475 P1,000 P 400 P 200 476 P 900 P 600 P 800 477 P 800 P 900 P1,400 478 P 600 P 1,100 P1,900
Overhead is charged to production at 70% of the direct materials cost. Jobs 475, 477, and 478 have been delivered to the customer.
Samuelson’s Work in Process inventory balance on June 30 was: a. P6,450. b. P2,860. c. P2,300. d. P2,720. 41. B Easy
Beaver Company used a predetermined overhead rate last year of P2 per direct labor hour, based on an estimate of 25,000 direct labor hours to be worked during the year. Actual costs and activity during the year were:
Actual manufacturing overhead cost incurred P47,000 Actual direct labor hours worked ... 24,000 The under- or overapplied overhead last year was:
a. P1,000 underapplied. b. P1,000 overapplied. c. P3,000 overapplied. d. P2,000 underapplied. 42. B Hard
Dowan Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. Last year Dowan Company incurred P156,600 in actual manufacturing overhead cost. The
Manufacturing Overhead account showed that overhead was underapplied by P12,600 for the year. If the predetermined overhead rate is P6.00 per direct labor hour, how many hours did the company work during the year?
a. 26,000 hours b. 24,000 hours c. 28,200 hours d. 25,000 hours
43. D Medium
Paul Company used a predetermined overhead rate during the year just completed of P3.50 per direct labor hour, based on an estimate of 22,000 direct labor hours to be worked during the year. Actual overhead cost and activity during the year were:
Actual manufacturing overhead cost incurred .. P90,000 Actual direct labor hours worked ... 25,000 The under- or overapplied overhead for the year would be: a. P13,000 underapplied. b. P10,500 overapplied. c. P2,500 overapplied. d. P2,500 underapplied. 44. A Medium
Sweet Company applies overhead to jobs on the basis of 125% of direct labor cost. If Job 107 shows P10,000 of manufacturing overhead
applied, how much was the direct labor cost on the job? a. P8,000 b. P12,500 c. P11,250 d. P10,000 45. C Medium
Knowlton Company applies overhead to completed jobs on the basis of 70% of direct labor cost. If Job 501 shows P21,000 of manufacturing overhead applied, the direct labor cost on the job was:
a. P14,700. b. P21,000. c. P30,000. d. P27,300. 46. A Hard
The balance in White Company's Work in Process inventory account was P15,000 on August 1 and P18,000 on August 31. The company incurred P30,000 in direct labor cost during August and requisitioned P25,000 in raw materials (all direct material). If the sum of the debits to the Manufacturing Overhead account total P28,000 for the month, and if the sum of the credits totaled P30,000, then:
a. Finished Goods was debited for P82,000 during the month. b. Finished Goods was credited for P83,000 during the month.
c. Manufacturing Overhead was underapplied by P2,000 at the end of the month.
47. B Medium
Under Lamprey Company's job-order costing system, manufacturing overhead is applied to Work in Process inventory using a predetermined overhead rate. During January, Lamprey's transactions included the following:
Direct materials issued to production .... P 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
Lamprey Company had no beginning or ending inventories. What was the cost of goods manufactured for January?
a. P302,000 b. P310,000 c. P322,000 d. P330,000 48. A Easy
Compute the amount of direct materials used during November if P20,000 in raw materials were purchased during the month and if the
inventories were as follows:
Balance Balance November 1 November 30 Raw materials .... P 4,000 P 3,000 Work in process .. 12,000 15,000 Finished goods ... 24,000 27,000 a. P21,000. b. P19,000. c. P18,000. d. P15,000. 49. C Hard
Sharp Company's records show that overhead was overapplied by P10,000 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 P6,000 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 P16,000 for the year.
b. The company's net income is understated by P6,000 for the year.
c. Under the circumstances posed above, the error in recording depreciation would have no effect on net income for the year. d. The P6,000 in depreciation should have been charged to Work in Process rather than to administrative expense.
Reference: 3-1
Wayne company uses a job costing system and applies overhead to jobs using a predetermined overhead rate based on direct labor-hours. The company had the following inventories at the beginning and end of March:
March 1 March 31 Direct Materials... P36,000 P30,000 Work in Process... 18,000 12,000 Finished Goods... 54,000 72,000
The following additional data pertain to operations during March: Direct materials purchased... P84,000
Direct labor cost... P60,000
Direct labor rate... P7.50 per direct labor-hour Overhead rate... P10.00 per direct labor-hour 50. D Medium CPA adapted Refer To: 3-1
During March total debits to Work in Process were: a. P84,000. b. P220,000. c. P144,000. d. P230,000. 51. D Medium CPA adapted Refer To: 3-1
The Cost of Goods Manufactured for March was: a. P212,000.
b. P218,000. c. P230,000. d. P236,000.
Reference: 3-2
Hamilton Company uses job-order costing. Manufacturing overhead is applied using a predetermined rate of 150% of direct labor cost. Any over- or underapplied
manufacturing overhead is closed to the Cost of Goods Sold account at the end of each month. Additional information is available as follows:
Job 101 was the only job in process at January 31. The job cost sheet for this job contained the following costs at the beginning of the month: Direct materials ... P4,000
Direct labor ... P2,000 Applied manufacturing overhead .... P3,000
Jobs 102, 103, and 104 were started during February.
Direct materials requisitions for February totaled P26,000. Direct labor cost of P20,000 was incurred for February. Actual manufacturing overhead was P32,000 for February.
The only job still in process at February 28 was Job 104, with costs of P2,800 for direct materials and P1,800 for direct labor.
52. A Medium CPA adapted Refer To: 3-2
The cost of goods manufactured for February was: a. P77,700.
b. P78,000. c. P79,700. d. P85,000.
D Medium CPA adapted Refer To: 3-2 a. P700 overapplied. b. P1,000 overapplied. c. P2,000 overapplied. d. P2,000 underapplied. Reference: 3-3
Meyers Company had the following inventory balances at the beginning and end of November:
November 1 November 30 Raw Materials ... P17,000 P20,000 Finished Goods ... P50,000 P44,000 Work in Process .... P 9,000 P11,000
During November, P39,000 in raw materials (all direct materials) were drawn from inventory and used in production. The company's predetermined overhead rate was P8 per direct labor-hour, and it paid its direct labor workers P10 per hour. A total of 300 hours of direct labor time had been expended on the jobs in the beginning Work in Process inventory account. The ending Work in Process inventory account contained P4,700 of direct materials cost. The Company incurred P28,000 of actual manufacturing overhead cost during the month and applied P26,400 in manufacturing overhead cost. 54.
A Medium Refer To: 3-3
The raw materials purchased during November totaled: a. P42,000. b. P45,000. c. P36,000. d. P39,000. 55. C Medium Refer To: 3-3
The direct materials cost in the November 1 Work in Process inventory account totaled:
a. P6,600. b. P6,000. c. P3,600. d. P3,000.
56. B Hard Refer To: 3-3
The actual direct labor hours worked during November totaled: a. 2,800 hours. b. 3,300 hours. c. 3,500 hours. d. 3,600 hours. 57. C Hard Refer To: 3-3
The amount of direct labor cost in the November 30 Work in Process inventory was: a. P2,800. b. P3,300. c. P3,500. d. P6,300. Reference: 3-4
The following T accounts are for Stanford Company:
Raw Materials Cost of Goods Sold Beg. Bal. 7,000 | 24,000(2) |
(1)19,000 | | | | | | | |
Sales Salaries Expense Work in Process (4) 11,000 | Beg. Bal. 11,000 | ? (7) | (2) 15,000 |
| (4) 18,000 | | (6) 31,000 | | |
Accounts Payable Manufacturing Overhead | 19,000 (1) (2) 9,000 | 31,000 (6) | 5,000 (5) (3) 16,000 |
| (4) 8,000 | | (5) 5,000 | | |
Wages & Salaries Payable Finished Goods | 7,000 Beg. Bal. Beg. Bal. 18,000 |
| 37,000 (4) (7) 62,000 | | End. Bal. 15,000 | | | Accumulated Depreciation— Factory | 82,000 Beg. Bal. | 16,000 (3)
58. A Hard Refer To: 3-4
The indirect labor cost is: a. P8,000. b. P15,000. c. P18,000. d. P37,000. 59. D Hard Refer To: 3-4
The cost of goods manufactured is: a. P82,000. b. P64,000. c. P71,000. d. P62,000. 60. C Hard Refer To: 3-4
The cost of goods sold (after adjustment for under- or overapplied overhead) is: a. P58,000. b. P69,000. c. P72,000. d. P65,000. 61. B Medium Refer To: 3-4
The manufacturing overhead applied is: a. P24,000. b. P31,000. c. P38,000. d. P42,000. 62. B Hard Refer To: 3-4
The cost of direct materials used is: a. P14,000. b. P15,000. c. P18,000. d. P24,000. 63. A Hard Refer To: 3-4
The ending Work in Process account balance would be: a. P13,000.
b. P75,000. c. P20,000. d. P64,000. Reference: 3-5
Mallet Company has only Job 844 in process on March 1 of the current year. The job has been charged with P2,000 of direct material cost, P2,500 of direct labor cost, and P1,750 of manufacturing overhead cost. The company assigns overhead cost to jobs at a predetermined rate of 70% of direct labor cost. Any under- or overapplied overhead cost is closed to Cost of Goods Sold at the end of the month.
During March, the following activity and amounts were recorded by the company: Raw materials (all direct materials):
Purchased during the month ... P29,500 Used in production ... P30,500 Labor:
Direct labor hours worked during the month ... 2,500 Direct labor cost incurred ... P26,500 Indirect labor costs incurred ... P5,500 Manufacturing overhead costs incurred (total) .. P18,500 Inventories:
Raw materials (all direct) March 31 ... P7,500 Work in process, March 31 ... P14,500 Work in process inventory contains P5,500 of direct labor cost. 64.
A Medium Refer To: 3-5
The amount of direct materials cost in the March 31 work in process inventory account was:
a. P5,150. b. P9,350. c. P9,000. d. P3,850. 65. A Hard Refer To: 3-5
The cost of goods manufactured for March was: a. P67,300 b. P67,250 c. P81,800 d. P75,550 66. B Hard Refer To: 3-5
The entry to dispose of the under- or overapplied overhead cost for the month would include:
a. a debit of P50 to Cost of Goods Sold. b. a debit of P50 to Manufacturing Overhead. c. a debit of P5,500 to Manufacturing Overhead. d. a credit of P5,500 to Cost of Goods Sold. 67.
D Hard Refer To: 3-5
The balance in the March 1 in the Raw Materials inventory was: a. P10,500.
b. P9,500. c. P6,500. d. P8,500.
Reference: 3-6
The Milo Company's records for May contained the following information: Actual direct labor-hours ... 9,000 hours
Actual direct labor cost ... P 47,000 Direct material purchased ... 16,000 Direct material used ... 14,000 Cost of goods sold ... 100,000 Overapplied overhead ... 5,000 Ending inventories:
Raw materials ... 30,000 Work in process ... 50,000 Finished goods ... 70,000
The company uses a predetermined overhead rate of P5.00 per direct labor hour to apply manufacturing overhead to jobs.
68. C Medium Refer To: 3-6
The actual overhead cost incurred during the month was: a. P50,000. b. P55,000. c. P40,000. d. P45,000. 69. B Medium Refer To: 3-6
The total cost added to Work in Process during May was: a. P101,000.
b. P106,000. c. P61,000. d. P111,000. Reference: 3-7
The information below has been taken from the cost records of Tercel Company for the past year:
Raw materials used in production ... P326,000 Total manufacturing costs charged to jobs during
the year (includes raw materials, direct labor, and manufacturing overhead applied at the rate of 60 per
cent of direct labor cost) ... 686,000 Cost of goods available for sale ... 826,000 Selling and administrative expenses ... 25,000 Inventories
Beginning Ending Raw Materials ... P75,000 P 85,000 Work in Process ... 80,000 30,000 Finished Goods ... 90,000 110,000
70. D Medium CMA adapted Refer To: 3-7
The cost of raw materials purchased during the year amounted to: a. P411,000. b. P360,000. c. P316,000. d. P336,000. 71. B Medium CMA adapted Refer To: 3-7
Direct labor costs charged to production during the year amounted to: a. P135,000. b. P225,000. c. P360,000. d. P216,000. 72. C Medium CMA adapted Refer To: 3-7
The Cost of Goods Manufactured during the year was: a. P636,000. b. P766,000. c. P736,000. d. P716,000. 73. B Medium CMA adapted Refer To: 3-7
The Cost of Goods Sold for the year (before disposition of any overhead under- or overapplied) was:
a. P736,000. b. P716,000. c. P691,000. d. P801,000.
Reference: 3-8
The following data are for Potras Company:
Beginning Ending Finished goods inventory ... P30,000 P40,000 Work in process inventory ... P20,000 P13,000 Raw materials inventory ... P21,000 P26,000 Purchases of raw materials ... P71,000 Factory depreciation ... P 5,000 Other factory costs ... P10,000 Direct labor ... P27,000 Indirect labor ... P 6,000 Selling expense ... P12,000 Over- or underapplied overhead ... -0-74.
D Medium Refer To: 3-8
The cost of raw materials used in production was: a. P26,000. b. P71,000. c. P76,000. d. P66,000. 75. C Medium Refer To: 3-8
The cost of goods manufactured was: a. P114,000.
b. P133,000. c. P121,000. d. P138,000.
D Medium Refer To: 3-8 a. P131,000. b. P91,000. c. P81,000. d. P111,000. Reference: 3-9
The Bus Company uses a job-order cost system. The following information was recorded for September:
Added During September September 1 Direct Direct Job Number Inventory Materials Labor 1 P1,000 P 300 P200 2 1,400 250 300 3 500 1,500 150 4 750 4,000 400
The direct labor wage rate is P10 per hour. Overhead is applied at the rate of P5 per direct labor-hour. Jobs 1, 2, and 3 have been completed and transferred to finished goods. Job 2 has been delivered to the customer.
77. B Medium Refer To: 3-9
The ending Work in Process inventory is: a. P7,575. b. P5,350. c. P4,325. d. P5,150. 78. C Medium Refer To: 3-9
The Cost of Goods Manufactured for September is: a. P10,750. b. P11,275. c. P5,925. d. P7,625. 79. A Medium Refer To: 3-9
The Cost of Goods Sold for September (before disposition of any under-or overapplied overhead) is:
a. P2,100. b. P5,925. c. P3,700. d. P1,950.
Reference: 3-10
The following journal entries without Peso data were taken from the accounting records of Case Company. Case company has a job-order costing system and applies overhead to jobs using a predetermined overhead rate.
1. Work in Process ... XXX Manufacturing Overhead ... XXX Wages Payable ... XXX 2. Salary Expense ... XXX Wages Payable ... XXX 3. Manufacturing Overhead ... XXX Accumulated Depreciation ... XXX 4. Work in Process ... XXX Raw Materials ... XXX 5. Work in Process ... XXX Manufacturing Overhead ... XXX 6. Manufacturing Overhead ... XXX Raw Materials ... XXX 7. Finished Goods ... XXX Work in Process ... XXX 8. Raw Materials ... XXX Accounts Payable ... XXX 80. A Medium Refer To: 3-10
The entry to record the purchase of raw materials is: a. 8. b. 4. c. 6. d. 1. 81. C Medium Refer To: 3-10
The entry to transfer the cost of goods manufactured for the period is: a. 1. b. 4. c. 7. d. 5. 82. B Medium Refer To: 3-10
The entry to record the application of overhead is: a. 1.
b. 5. c. 6. d. 3.
83. B Medium Refer To: 3-10
The entry to record depreciation on manufacturing equipment is: a. 1.
b. 3. c. 4. d. 5. Reference: 3-11
Summit Company has provided the following inventory balances and manufacturing cost data for the month of January:
Inventories: January 1 January 31 Direct materials ... P30,000 P40,000 Work in process ... P15,000 P20,000 Finished goods ... P65,000 P50,000 Month of January Cost of goods manufactured ... P515,000 Manufacturing overhead applied .... P150,000 Direct materials used ... P190,000 Actual manufacturing overhead ... P144,000
Under Summit's job-order costing system, any over or underapplied overhead is closed to the Cost of Goods Sold account at the end of the calendar year (i.e., December 31). 84. D Medium CPA adapted Refer To: 3-11
What was the total amount of direct material purchases during January? a. P180,000 b. P190,000 c. P195,000 d. P200,000 85. C Medium CPA adapted Refer To: 3-11
How much direct labor cost was incurred during January? a. P170,000
b. P175,000 c. P180,000 d. P186,000
Reference: 3-12
The Tse Manufacturing Company uses a job-order costing system and applies overhead to jobs using a predetermined overhead rate. The company closes any balance in the Manufacturing Overhead account to Cost of Goods Sold. During the year the company's Finished Goods inventory account was debited for P125,000 and credited for P110,000.
Refer To: 3-12 a. P19,500.b. P22,000. c. P28,500. d. P31,000. Essay 88. Medium
Parker Company uses a job order cost system and applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor-hours. Last year manufacturing overhead and direct labor-hours were estimated at P50,000 and 20,000 hours, respectively, for the year. In June, Job #461 was completed. Materials costs on the job totaled P4,000 and labor costs totaled P1,500 at P5 per hour. At the end of the year, it was determined that the company worked 24,000 direct labor hours for the year and incurred P54,000 in actual manufacturing overhead costs.
Required:
a. Job #461 contained 100 units. Determine the unit cost that would appear on the job cost sheet.
b. Determine the under- or overapplied overhead for the year. Answer: a. Direct materials ... P4,000 Direct labor ... 1,500 Overhead (300* x P2.50**) .. 750 Total ... P6,250 Unit cost ... P62.50 * P1,500 ÷ P5.00/DLH = 300 DLH ** P50,000 ÷ 20,000 DLH = P2.50/DLH b. Actual overhead Cost ... P54,000 Overhead applied:
24,000 DLH x P2.50 ... 60,000 Overapplied overhead ... (P 6,000)
89. Hard
Gilford, Inc., uses a job order costing system. Costs going through the company's work in process account during June are given below. Manufacturing overhead is applied to production using a predetermined overhead rate based on direct labor cost.
Work in Process
______________________________________________________________________ _____________________________
Balance -0- | 95,000 Transferred out Direct materials 20,000 | Direct labor 30,000 | Manufacturing Overhead 60,000 | ______________________________________________________________________ ______________________________ Balance 15,000 |
Only Job 105 was still in process at the end of the month. This job had been charged with P3,000 in direct materials cost.
Required:
a. Complete the following job order cost card for Job 105: Direct materials ... P 3,000
Direct labor ... _______ Manufacturing overhead .... _______ Total cost at June 30 .. _______
b. Determine the total amount of materials cost charged to completed jobs during the month.
Answer:
a. Since only Job 105 was in process at the end of the month, all of the P15,000 balance in the Work in Process account must apply to it.
Total cost in Work in Process (all Job 105) ... P15,000 Less materials cost in Job 105 ... 3,000 Direct labor and manufacturing overhead cost .. P12,000 From the Work in Process T-account, it appears that
manufacturing overhead is being applied at 200% of direct labor cost.
Let X = Direct labor cost X + 2.00X = P12,000
b. Since P20,000 in materials cost was charged to Work in Process, and since only P3,000 in materials cost applies to Job 105, the difference of P17,000 represents the cost charged to completed jobs during the month.
90.
Easy Stan Wilson, a newly hired worker at Superior Molding, was puzzled by the job cost sheets attached to the jobs he worked on. He understood the materials and labor cost entries--these represent the actual costs of materials he requisitioned for the job and the cost of the labor hours he recorded for the job. However, he did not understand the entry for Manufacturing Overhead. This entry was made at the end of the day by the accountants and he had no idea where this number came from. He asked the company's controller, Mary Donner, but the only part of the explanation he understood was that the overhead entries do not represent actual overhead costs.
Required:
Explain to Stan what the Manufacturing Overhead entries on the job cost sheet mean.
Answer:
The Manufacturing Overhead entries on the job cost sheet are arrived at by applying a predetermined overhead rate to the base, which is most likely direct labor-hours. This number does not represent actual overhead costs. There are several reasons for this. First, by
definition, it is difficult or impossible to trace overhead costs to particular jobs. Therefore, actual overhead costs cannot really be traced to the jobs Stan works on. Even so, an "actual" rate could be used instead of a predetermined rate for spreading overhead costs among jobs. However, most companies choose to use a predetermined rate since actual rates tend to fluctuate and cannot be determined until the close of the accounting period.
91.
Medium Bakerston 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 Ending Balance Balance Raw materials ... P14,000 P22,000 Work in process ... 27,000 9,000 Finished goods ... 62,000 77,000
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 33,000 machine-hours and incur P231,000 in manufacturing overhead cost. The following transactions were recorded for the year:
• Raw materials were purchased, P315,000.
• Raw materials were requisitioned for used in production, P307,000 (P281,000 direct and P26,000 indirect). • The following employee costs were incurred: direct labor, P377,000; indirect labor, P96,000; and administrative salaries, P172,000.
• Selling costs, P147,000.
• Factory utility costs, P10,000.
is related to factory operations and P7,000 is related to selling and administrative activities.
• Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34,000 machine-hours. • Sales for the year totaled P1,253,000 .
Required:
a. Prepare a schedule of cost of goods manufactured in good form.
b. Was the overhead under- or overapplied? By how much? c. Prepare an income statement for the year in good form. The company closes any under- or overapplied overhead to Cost of Goods Sold.
Answer:
a. Schedule of cost of goods manufactured
Estimated total manufacturing overhead(a) P231,000 Estimated total machine-hours (b) ... 33,000 Predetermined overhead rate (a) ÷ (b) ... P7.00 Actual total machine-hours (a) ... 34,000 Predetermined overhead rate (b) ... P7.00 Overhead applied (a) X (b) ... P238,000 Direct materials:
Raw materials inventory, beginning ....P 14,000 Add: purchases of raw materials ... 315,000 Total raw materials available ... 329,000 Deduct: raw materials inventory, ending 22,000 Raw materials used in production ... 307,000 Less: indirect materials ... 26,000 Direct materials ... 281,000 Direct labor ... 377,000 Manufacturing overhead applied ... 238,000 Total manufacturing costs ... 896,000 Add: Beginning work in process inventory 27,000 923,000 Deduct: Ending work in process inventory 9,000 Cost of goods manufactured ...P 914,000
Goods available for sale ... 976,000 Ending finished goods inventory ... 77,000 Unadjusted cost of goods sold ... 899,000 Add: underapplied overhead ... 14,000 Adjusted cost of goods sold ...P 913,000
Sales ... P1,253,000 Cost of goods sold (adjusted) ... 913,000 Gross margin ... 340,000 Less selling and administrative expenses:
Administrative salaries ...P 172,000 Selling costs ... 147,000 Depreciation ... 7,000 326,000 Net income ... P 14,000 92.
Medium Allenton 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 ... P 26,000 Work in process ... 47,000 Finished goods ... 133,000
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 31,000 machine-hours and incur P248,000 in manufacturing overhead cost. The following transactions were recorded for the year:
a. Raw materials were purchased, P411,000.
b. Raw materials were requisitioned for used in production, P409,000 (P388,000 direct and P21,000 indirect).
c. The following employee costs were incurred: direct labor, P145,000; indirect labor, P61,000; and administrative salaries, P190,000.
d. Selling costs, P148,000.
e. Factory utility costs, P12,000.
f. Depreciation for the year was P121,000 of which P114,000 is related to factory operations and P7,000 is related to selling and administrative activities.
g. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 29,000 machine-hours.
h. The cost of goods manufactured for the year was P783,000.
i. Sales for the year totaled P1,107,000 and the costs on the job cost sheets of the goods that were sold totaled P768,000.
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.
Answer:
a. Raw Materials Inventory ... 411,000
Cash ... 411,000 b. Work in Process Inventory ... 388,000
Raw Materials Inventory ... 409,000 c. Work in Process Inventory ... 145,000
Manufacturing Overhead ... 61,000 Administrative Salary Expense .. 190,000
Cash ... 396,000 d. Selling Expenses ... 148,000 Cash ... 148,000 e. Manufacturing Overhead ... 12,000 Cash ... 12,000 f. Manufacturing Overhead ... 114,000 Depreciation Expense ... 7,000 Accumulated Depreciation .. 121,000 g. Work in Process ... 232,000 Manufacturing Overhead .... 232,000 h. Finished Goods ... 783,000 Work in Process ... 783,000 i. Cash ... 1,107,000 Sales ... 1,107,000 Cost of Goods Sold ... 768,000
Finished Goods ... 768,000 j. Manufacturing Overhead ... 24,000
93.
Medium The Collins Company uses a job-order cost system and applies manufacturing overhead cost to jobs on the basis of the cost of
materials used in production. At the beginning of the most recent year, the following estimates were made as a basis for computing the
predetermined overhead rate for the year: manufacturing overhead cost, P200,000; direct materials cost, P160,000. The following transactions took place during the year (all purchases and services were acquired on account):
a. Raw materials purchased, P86,000.
b. Raw materials requisitioned for use in production (all direct materials), P98,000.
c. Utility costs incurred in the factory, P15,000. d. Salaries and wages incurred as follows:
Direct labor ... P175,000 Indirect labor ... P70,000 Selling and administrative salaries .. P125,000 e. Maintenance costs incurred in the factory, P15,000. f. Advertising costs incurred, P89,000.
g. Depreciation recorded for the year, P80,000 (80% relates to factory assets and the remainder relates to selling and administrative assets).
h. Rental cost incurred on buildings, P70,000, (75% of the space is occupied by the factory, and 25% is occupied by sales and
administration).
i. Miscellaneous selling and administrative costs incurred, P11,000.
j. Manufacturing overhead cost was applied to jobs as per company policy.
k. Cost of goods manufactured for the year, P500,000.
l. Sales for the year (all on account) totaled P1,000,000. These goods cost P600,000 to manufacture.
Required:
Prepare journal entries to record the information above. Key your entries by the letters a through l.
Answer: a. Raw Materials ... 86,000 Accounts Payable ... 86,000 b. Work in Process ... 98,000 Raw Materials ... 98,000 c. Manufacturing Overhead ... 15,000 Accounts Payable ... 15,000 d. Work in Process ... 175,000 Manufacturing Overhead ... 70,000 Salaries Expense ... 125,000
e. Manufacturing Overhead ... 15,000 Accounts Payable ... 15,000 f. Advertising Expense ... 89,000 Accounts Payable ... 89,000 g. Manufacturing Overhead ... 64,000 Depreciation Expense ... 16,000 Accumulated Depreciation ... 80,000 h. Manufacturing Overhead ... 52,500 Rent Expense ... 17,500 Accounts Payable ... 70,000 i. Miscellaneous Expense ... 11,000 Accounts Payable ... 11,000 j. Work in Process ... 122,500 Manufacturing Overhead ... 122,500 ((P200,000/P160,000) x P98,000)) k. Finished Goods ... 500,000 Work in Process ... 500,000 l. Accounts Receivable ... 1,000,000 Sales ... 1,000,000 Cost of Goods Sold ... 600,000
Finished Goods ... 600,000 94.
Hard
Carver Test Systems manufactures automated testing equipment. The company uses a job-order costing system and applies overhead on the basis of machine-hours. At the beginning of the year, estimated manufacturing overhead was P1,960,000 and the estimated machine-hours was 98,000. Data regarding several jobs at Carver are presented below. Beginning Direct Direct Machine
Job Number Balance Materials Labor Hours XJ-107 P118,600 P 4,000 P 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 RX-115 - 18,990 21,845 1,400
By the end of the first month (January), all jobs but RX-115 were completed, and all completed jobs had been delivered to customers except for SL-205.
in the account is computed as follows:
Beginning balance, job SL-205 ... P 34,350 November charges to job SL-205
Direct materials ... 71,800 Direct labor ... 32,175 Manufacturing overhead applied* .... 54,000 Ending balance, job SL-205 ... P192,325
* Predetermined overhead rate = P1,960,000 ÷ 98,000 MH = P20 per MH
Overhead applied = 2,700 machine-hours X P20 per MH = P54,000 95.
Medium Dotsero Technology, Inc., has a job-order costing system. The company uses predetermined overhead rates in applying manufacturing overhead cost to individual jobs. The predetermined overhead rate in Department A is based on machine-hours, and the rate in Department B is based on direct materials cost. At the beginning of the most recent year, the company’s management made the following estimates for the year: Department
A B Machine-hours ... 70,000 19,000 Direct labor-hours ... 30,000 60,000 Direct materials cost ... P195,000 P282,000 Direct labor cost ... P260,000 P520,000 Manufacturing overhead cost ... P420,000 P705,000
Job 243 entered into production an April 1 and was completed on May 12. The company’s cost records show the following information about the job: Department
A B Machine-hours ... 250 60 Direct labor-hours ... 70 120 Direct materials cost ... P840 P1,100 Direct labor cost ... P610 P880
At the end of the year, the records of Dotsero showed the following actual cost and operating data for all jobs worked on during the year: Department
A B Machine-hours ... 61,000 20,000 Direct labor-hours ... 28,000 66,000 Direct materials cost ... P156,000 P284,000 Manufacturing overhead cost ... P385,000 P705,000 Required:
a. Compute the predetermined overhead rates for Department A and Department B.
b. Compute the total overhead cost applied to Job 243.
department at the end of the current year. Answer:
a. Department A predetermined overhead rate: Estimated overhead cost/Estimated machine-hours = P420,000/70,000 = P6.00
Department B predetermined overhead rate:
Estimated overhead cost/Estimated direct materials cost = P705,000/P282,000 = 250% of direct materials cost b. Overhead applied to Job 243:
Department A: 250 x P6.00 = P1,500 Department B: P1,100 x 2.5 = P2,750 P4,250
c. Department A Department B Manufacturing overhead incurred... P385,000 P705,000 Manufacturing overhead applied:
61,000 X P6.00 = ... 366,000
P284,000 X 250% = ... 710,000 Underapplied (overapplied) overhead P 19,000 P (5,000) 96.
Medium Scanlon Company has a job-order costing system and applies manufacturingoverhead cost to products on the basis of machine hours. The following estimates were used in preparing the predetermined overhead rate for the most recent year:
Machine hours ... 95,000 Manufacturing overhead cost ... P1,710,000
During the most recent year, a severe recession in the company’s
industry cause the curtailment of production and a buildup of inventory in the company’s warehouses. The company’s cost records revealed the following actual cost and operating data for the year:
Machine hours ... 75,000 Manufacturing overhead cost ... P1,687,500
Amount of applied overhead in inventories at year-end: Work in process ... P 337,500
Answer:
The company’s predetermined overhead rate for the year is: P1,710,000/95,000 = P18 per machine hour
The amount of under-/overapplied overhead is: Actual overhead ... P1,687,500 Applied overhead (P18 X 75,000) 1,350,000 Underapplied overhead ... P 337,500 Allocation of underapplied overhead:
Overhead applied in work in process P 337,500 25.00% P 84,375 Overhead applied in finished goods 253,125 18.75% 63,281 Overhead applied in cost of goods sold 759,375 56.25% 189,844 Total overhead applied P1,350,000 100.00% P337,500 The entire amount of underapplied overhead P337,500 is added to Cost of Goods Sold where no allocation occurs. Allocation results in only P189,844 being added to Cost of Goods Sold. Net income would be higher under allocation by P337,500 - P189,844 = P147,650.
97. Medium
The following cost data relate to the manufacturing activities of the Kamas Company during the most recent year:
Manufacturing overhead costs incurred during the year: Property taxes ... P 1,600
Utilities, factory ... 2,600 Indirect labor ... 5,100 Depreciation, factory ... 13,000 Insurance, factory ... 2,500 Total actual costs ... P24,800 Other costs incurred during the year: Purchases of raw materials . P15,000 Direct labor cost ... 22,000 Inventories:
Raw materials, beginning ... P 5,000 Raw materials, ending ... 4,400 Work in process, beginning . 3,500 Work in process, ending .... 4,500
The company uses a predetermined overhead rate to charge overhead cost to production. The rate for the year just completed was P4.00 per machine-hour; a total of 6,000 machine-hours were recorded for the year. Required:
a. Compute the amount of under- or overapplied overhead cost for the year just ended.
b. Prepare a schedule of cost of goods manufactured for the year. Answer:
a. Actual total manufacturing overhead cost ... P24,800 Manufacturing overhead applied: 6,000 x P4.00 = 24,000 Underapplied manufacturing overhead ... P 800
Raw materials used in production ... 15,600 Direct labor ... 22,000 Manufacturing overhead applied to
work in process ... 24,000 Total manufacturing costs ... 61,600 Add beginning work in process ... 3,500 65,100 Deduct ending work in process ... 4,500 Cost of goods manufactured ... P60,600
98. Hard
Arthur Manufacturing Company produces a single product. The controller has asked your help in preparing a schedule of cost of goods
manufactured for the month just ended. The following information is available:
1. Eleven thousand units were sold at P22 per unit.
2. Thirteen thousand units requiring one unit each of raw materials were produced.
3. Raw materials inventory at the beginning of the month was 1,100 units at P4 each.
4. During the month, two purchases of raw materials were made: Purchase #1: 7,000 units at P5 each
Purchase #2: 6,000 units at P5.50 each
5. The company uses the first-in, first-out method of determining raw materials inventories.
6. The work in process inventories were:
Beginning of the month: 1,500 units valued at P17,000 End of the month: 1,500 units valued at P19,000 7. Direct labor cost was P110,000.
8. Overhead is applied to production on the basis of 65% of direct labor cost.
Required:
Answer:
Arthur Manufacturing Company Schedule of Cost of Goods Manufactured For the Year Just Ended
Raw materials used:
Beginning raw materials inventory ... P 4,400 Purchases ... 68,000 Raw materials available ... 72,400 Ending raw materials inventory ... 6,050 Raw materials used ... 66,350 Direct labor ... 110,000 Manufacturing overhead applied
to work in process ... 71,500 Total manufacturing costs ... 247,850 Add: Work in process, beginning ... 17,000 264,850 Deduct: Work in process, ending ... 19,000 Cost of goods manufactured ... P245,850 Computations: Raw materials: Beginning: 1,100 @ P4 ... P 4,400 Purchases: 7,000 @ P5 ... P35,000 6,000 @ P5.50... 33,000 68,000 Ending: 1,100 @ P5.50 ... (6,050) Raw materials used ... P69,350 Units:
1,100 + 7,000 + 6,000 – 13,000 = 1,100 units in ending inventory. Factory overhead applied to work in process:
