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Exam 7: Job Costing

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Question 31

True/False

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The journal entry to record actual manufacturing overhead for indirect material debits Manufacturing Overhead (Control)and credits Accounts Payable.

A) True
B) False

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Question 32

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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.

E) B) and C)
F) A) and D)

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Question 33

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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.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: $\begin{array} { | l | r | r | r | r | } \hline & \begin{array} { r } \text { Work-in } \\\text { Process }\end{array} & \begin{array} { r } \text { Finished } \\\text { Goods }\end{array} & \begin{array} { r } \text { Cost of } \\\text { Goods } \\\text { Sold }\end{array} & \text { Total } \\\hline \text { Direct materials } & \$ 5,010 & \$ 11,500 & \$ 111,320 & \$ 127,830 \\\hline \text { Direct labor } & 2,430 & 10,500 & 101,640 & 114,570 \\\hline \begin{array} { l } \text { Manutacturing } \\\text { overhead } \\\text { applied }\end{array} & 3,200 & 7,200 & 69,600 & 80,000 \\\hline \text { Total } & \$ 10,640 & \$ 29,200 & \$ 282,660 & \$ 322,400 \\\hline\end{array}$

Underapplied overhead occurs when the balance in the Manufacturing Overhead Control account is:

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? $\begin{array} { | l | r | } \hline \text { Estimated manufacturing overhead for the year } & \$ 30,000 \\\hline \text { Estimated direct labor hours for the year } & 2,000 \\\hline\end{array}$

A job is a product or service that can be easily and conveniently distinguished from other products/services.

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:

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

Reyes Corporation applies overhead using a normal costing approach based upon machine-hours.Budgeted factory overhead was $232,750,budgeted machine-hours were 17,500.Actual factory overhead was $227,830,actual machine-hours were 16,150.How much is the over- or underapplied overhead?

One of the primary differences between job costing for service and manufacturing companies is service firms generally:

Which of the following approaches allocates overhead by multiplying a predetermined overhead rate × actual activity?

For which of the following businesses would a job order cost system be appropriate?

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: 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? $\begin{array} { | l | r | } \hline \text { Direct Materials Inventory } & \$ 12,000 \\\hline \text { Work-ir-Process Inventory } & 4,500 \\\hline \text { Finished Goods Inventory } & 11,000 \\\hline \text { Manufacturing Overhead Control } & 16,500 \\\hline \text { Accounts Payable } & 6,000 \\\hline\end{array}$

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: Lamar Company had no beginning or ending inventories.What was the cost of goods manufactured for June? (CMA adapted) $\begin{array} { | l | r | } \hline \text { Direct materials issued to production } & \$ 90,000 \\\hline \text { Indirect materials issued to production } & \$ 8,000 \\\hline \text { Manufacturing overhead cost incurred } & \$ 125,000 \\\hline \text { Manufacturing overhead cost applied } & \$ 113,000 \\\hline \text { Direct labor cost incurred } & \$ 107,000 \\\hline\end{array}$

Accounting for direct materials and direct labor is easier than accounting for manufacturing overhead costs.

If a company multiplies its actual overhead rate by the actual activity level of its allocation base,it is using:

Why might a company use a predetermined rate for applying overhead rather than just apply actual overhead?

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:

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?

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?