Ex. 116
Manufacturing cost data for Dolan Company, which uses a job order cost system, are presented below:
Case A Case B
Direct Materials Used (a) $103,000
Direct Labor $ 70,000 140,000
Manufacturing Overhead Applied 63,000 (d)
Total Manufacturing Costs 240,000 (e)
Work in Process, 1/1/02 (b) 45,000
Total Cost of Work in Process 300,000 (f)
Work in Process, 12/31/02 (c) 40,000
Cost of Goods Manufactured 205,000 (g)
Instructions
Indicate the missing amount for each letter. Assume that overhead is applied on the basis of direct labor cost and that the rate is the same for both cases.
Ex. 117
Gray Corporation had the following transactions during its first month of operations:
1. Purchased raw materials on account, $85,000.
2. Raw materials of $30,000 were requisitioned to the factory. An analysis of the materials requisition slips indicated that $6,000 was classified as indirect materials.
3. Factory labor costs incurred were $95,000 of which $84,000 pertained to factory wages payable and $11,000 pertained to employer payroll taxes payable.
4. Time tickets indicated that $80,000 was direct labor and $15,000 was indirect labor.
5. Overhead costs incurred on account were $96,000.
6. Manufacturing overhead was applied at the rate of 150% of direct labor cost.
7. Goods costing $115,000 are still incomplete at the end of the month; the other goods were completed and transferred to finished goods.
8. Finished goods costing $90,000 to manufacture were sold on account for $120,000.
Instructions
Journalize the above transactions for Gray Corporation.
Ex. 118
Watson Manufacturing Company employs a job order cost accounting system and keeps perpetual inventory records. The following transactions occurred in the first month of operations:
1. Direct materials requisitioned during the month:
Job 101 $22,000
Job 102 16,000
Job 103 24,000
$62,000
2. Direct labor incurred and charged to jobs during the month was:
Job 101 $30,000
Job 102 26,000
Job 103 20,000
$76,000
3. Manufacturing overhead was applied to jobs worked on using a predetermined overhead rate based on 75% of direct labor costs.
4. Actual manufacturing overhead costs incurred during the month amounted to $66,000.
5. Job 101 consisting of 1,000 units and Job 103 consisting of 200 units were completed during the month.
Ex. 118 (cont.)
Instructions
(a) Prepare journal entries to record the above transactions.
(b) Answer the following:
1. How much manufacturing overhead was applied to Job 103 during the month?
2. Compute the unit cost of Jobs 101 and 103.
3. What is the balance in Work In Process Inventory at the end of the month?
4. Determine if manufacturing overhead was under- or overapplied during the month. How much?
Ex. 119
The following inventory information is available for Ricci Manufacturing Corporation for the year ended December 31, 2002:
Beginning Ending
Inventories:
Raw materials $17,000 $19,000
Work in process 9,000 14,000
Finished goods 11,000 8,000
Total $37,000 $41,000
In addition, the following transactions occurred in 2002:
1. Raw materials purchased on account, $75,000.
2. Incurred factory labor, $80,000, all is direct labor. (Credit Factory Wages Payable).
3. Incurred the following overhead costs during the year: Utilities $6,800, Depreciation on manufacturing machinery $8,000, Manufacturing machinery repairs $6,200, Factory insurance $9,000 (Credit Accounts Payable and Accumulated Depreciation).
4. Assigned $80,000 of factory labor to jobs.
5. Applied $32,000 of overhead to jobs.
Instructions
(a) Journalize the above transactions.
(b) Reproduce the manufacturing cost and inventory accounts. Use T-accounts.
(c) From an analysis of the accounts, compute the following:
1. Raw materials used.
2. Completed jobs transferred to finished goods.
3. Cost of goods sold.
4. Under- or overapplied overhead.
Ex. 120
Job cost sheets for Howard Manufacturing are as follows:
Job No 210 Quantity 1,500
Manufacturing
Date Direct Materials Direct Labor Overhead
July 1 7,000 8,000 12,000
8 7,800
10 10,000
15 6,500
25 15,000
Job No 211 Quantity 1,200
Manufacturing
Date Direct Materials Direct Labor Overhead
July 1 4,000 6,000 9,000
10 9,000
15 8,000
20 7,000
27 12,000
Ex. 120 (cont.)
Instructions
(a) Answer the following questions:
1. What was the balance in Work in Process Inventory on July 1 if these were the only unfinished jobs?
2. What was the predetermined overhead rate in June if overhead was applied on the basis of direct labor cost?
3. If July is the start of a new fiscal year and the overhead rate is 20% higher than in the preceding year, how much overhead should be applied to Job 210 in July?
4. Assuming Job 210 is complete, what is the total and unit cost of the job?
5. Assuming Job 211 is the only unfinished job at July 31, what is the balance in Work in Process Inventory on this date?
(b) Journalize the summary entries to record the assignment of costs to the jobs in July. (Note: Make one entry in total for each manufacturing cost element.)
Ex. 121
Garner Company begins operations on July 1, 2002. Information from job cost sheets shows the following:
Manufacturing Costs Assigned
Job No. July August September
100 $12,000 $8,800
101 7,800 9,700 $12,000
102 5,000
103 11,800 6,000
104 5,800 7,000
Job 102 was completed in July. Job 100 was completed in August, and Jobs 101 and 103 were completed in September. Each job was sold for 60% above its cost in the month following completion.
Instructions
(a) Compute the balance in Work in Process Inventory at the end of July.
(b) Compute the balance in Finished Goods Inventory at the end of September.
(c) Compute the gross profit for August.
Ex. 122
The accounting records of Roland Manufacturing Company include the following information:
Dec. 31 Jan. 1
Work in process inventory $ 20,000 $ 50,000
Finished goods inventory 120,000 140,000
Direct materials used 350,000
Direct labor 160,000
Selling expenses 125,000
Manufacturing overhead is applied at a rate of 150% of direct labor cost.
Ex. 122 (cont.)
Instructions
Answer the following questions:
1. What are the total of the debits to Work in Process Inventory during the year?
2. What is the amount transferred to Finished Goods Inventory during the year?
3. What is the cost of goods sold?
Ex. 123
Stoll Manufacturing, Inc. uses a job order costing system. The company uses predetermined overhead rates in applying manufacturing overhead to individual jobs. The predetermined overhead rate in Department X is based on direct labor hours, the rate in Department Y is based on machine hours, and the rate in Department Z is based on direct labor cost. At the beginning of the most recent year, members of Stoll’s management team made the following estimates for the year:
Department
X Y Z
Direct labor hours 80,000 26,000 60,000
Machine hours 50,000 85,000 23,000
Direct labor cost $400,000 $150,000 $800,000
Direct materials $200,000 $ 26,000 $ 42,000
Manufacturing overhead $560,000 $340,000 $240,000
a. Compute the predetermined overhead rates for Departments X, Y, and Z.
Ex. 123 (cont.)
b. Stoll Manufacturing’s records show the following information for Job #6854, which was entered into production on January 17 and completed on March 7.
Department
X Y Z
Direct labor hours 420 54 375
Machine hours 200 120 125
Direct labor cost $2,400 $1,080 $1,390
Direct materials $ 842 $1,260 $2,065
Compute the total manufacturing overhead applied to Job #6854.
c. On December 31, Stoll showed the following actual costs and operating data for all jobs worked on during the year:
Department
X Y Z
Direct labor hours 76,000 28,920 63,000
Machine hours 54,000 87,200 21,000
Direct labor cost $395,200 $138,000 $815,000
Direct materials $215,900 $ 24,380 $ 39,080
Manufacturing overhead $540,000 $345,000 $254,000
Compute the amount of under- or overapplied overhead in each department at the end of the year and indicate whether it is under- or overapplied.
Ex. 124
Mr. J. G. Pigg, III is the sole owner of a brick company that manufactures custom bricks used in upscale homes. No two customers have the same type of bricks. The bricks go through three processes: mixing, shaping, and firing. The company uses a job order cost system and computes a predetermined overhead rate in each department. The mixing department bases its rate on direct materials, the shaping department bases its rate on machine hours, and the firing department bases its rate on direct labor hours. At the beginning of the year, the company made the following estimates:
Department
Mixing Shaping Firing
Direct labor hours 80,000 45,000 60,000
Machine hours 30,000 70,000 21,000
Direct materials $300,000 $ 40,000 $15,000
Manufacturing overhead $150,000 $140,000 $75,000
a. Compute the predetermined overhead rate to be used in each department during the upcoming year.
b. Assume the overhead rates that you computed in a. above are in effect. Compute the total overhead cost to be assigned to Dr. Snout’s order—Job #5417, assuming the following data:
Department
Mixing Shaping Firing
Direct labor hours 300 80 92
Machine hours 80 120 120
Direct materials $6,000 $120 $300
c. If actual overhead incurred totaled $3,500, compute the amount of over- or underapplied manufacturing overhead.
Ex. 125
Landis Company uses a job order cost system in each of its two manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department A and machine hours in Department B.
In establishing the predetermined overhead rates for 2002, the following estimates were made for the year:
Department
A B
Manufacturing overhead $2,100,000 $1,600,000
Direct labor cost 1,200,000 1,200,000
Direct labor hours 100,000 100,000
Machine hours 200,000 400,000
During January, the job cost sheet showed the following costs and production data:
Department
A B
Direct materials used $195,000 $128,000
Direct labor cost 100,000 110,000
Manufacturing overhead incurred 180,000 135,000
Direct labor hours 8,000 8,400
Machine hours 16,000 34,000
Instructions
(a) Compute the predetermined overhead rate for each department.
(b) Compute the total manufacturing cost assigned to jobs in January in each department.
(c) Compute the balance in the Manufacturing Overhead account at the end of January and indicate whether overhead is over- or underapplied.
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