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Exam 2: Job Order Costing and Analysis

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Question 31

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The journal entry to record the usage of Indirect Materials includes a debit to Work in Process Inventory.

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B) False

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Question 32

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When actual overhead cost exceeds the overhead applied, overhead is said to be overapplied.

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Question 33

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If one unit of Product Z2 used $2.50 of direct materials and $3.00 of direct labor, sold for $8.00, and was assigned overhead at the rate of 30% of direct labor costs, how much gross profit was realized from this sale?

A company's ending inventory of finished goods has a cost of $45,000 and consists of 750 units. If the overhead applicable to these goods is $8,400, and overhead is applied at the rate of 60% of direct labor, what is the cost of the direct materials used to produce these units?

The direct materials section of a job cost sheet shows the materials costs assigned to a specific job, but the direct labor section only shows the total hours of labor allocated to the job.

Prepare journal entries to record the following transactions and events for April using a job order costing system. (a) Purchased raw materials on credit, $69,000. (b) Raw materials requisitioned: $26,000 direct and $5,400 indirect. (c) Factory payroll totaled $46,000, including $9,500 indirect labor. (d) Paid other actual overhead costs totaling $14,500 cash. (e) Applied overhead totaling $28,200. (f) Finished and transferred jobs totaling $77,500. (g) Jobs costing $58,800 were sold on credit for $103,000.

The Marina Corp. has applied overhead to jobs during the period as follows: The application of overhead has resulted in a $5,600 credit balance in the Factory Overhead account, and this amount is not material. The entry to dispose of this remaining factory overhead balance is:

A company uses a job order costing system and applies overhead on the basis of direct labor cost. A summary of the company's Work in Process Inventory account for December appears below. $\begin{array}{l}\text { Work in Process }\\\begin{array} { | l | l | l | r | r | r | } \hline \text { Date } & \text { Explanation } & \text { PR } & \text { Debit } & \text { Credit } & \text { Balance } \\\hline \text { Dec. 1 } & & & & & 73,800 \\\hline \text { Dec. } & \text { Direct Materials } & \text { G-20 } & 235,800 & & 309,600 \\\hline \text { Dec. } & \text { Direct Labor } & \text { G-20 } & 117,00 \mathrm { C } & & 426,600 \\\hline \text { Dec. } & \text { Factory Overhead } & \text { G-20 } & 187,20 \mathrm { C } & & 613,800 \\\hline \text { Dec. } & \text { Tob No. 5 completed } & \text { G-8 } & & 90,900 & 522,900 \\\hline \text { Dec. } & \text { Tob No. 6 completed } & \text { G-10 } & & 131,40 \mathrm { C } & 391,50 \mathrm { O } \\\hline\text { Dec. } & \text { Tob No. 7 completed } & \text { G-12 } & & 73,80 \mathrm { O } & 317,700 \\\hline \text { Dec.31 } & \text { Tob No. 8 completed } & \text { G-15 } & & 168,30 \mathrm { C } & 149,40 \mathrm { C } \\\hline & & & & & \\\hline\end{array}\end{array}$ Fill in the blanks for the following: (1) The total cost of the direct materials, direct labor, and factory overhead applied in the December 31 Work in Process inventory is $________. (2) The company's overhead application rate is ________% (3) Job No. 6 had $26,550 of direct labor cost. Therefore, the job must have had $________ of direct materials cost. (4) Job No. 8 had $73,998 of direct materials cost. Therefore, the job must have had $________ of factory overhead cost.

The Factory Overhead account will have a debit balance at the end of a period if overhead applied during the period is greater than the overhead incurred.

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 application rate of 150% of direct labor cost. Minstrel's beginning and ending Work in Process Inventory are $15,500 and $27,000 respectively. Compute the cost of product transferred to Finished Goods Inventory:

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 payment of the factory payroll is:

A company that produces a large number of standardized units would normally use a job order costing system.

When the actual overhead incurred during an accounting period is more than the overhead applied to jobs, the overhead is said to be ________.

A ________ is calculated by relating total estimated factory overhead to an allocation factor such as total estimated direct labor cost, and is used to allocate factory overhead to specific jobs.

The predetermined overhead rate for Shilling Manufacturing is based on estimated direct labor costs of $350,000 and estimated factory overhead of $770,000. Actual costs incurred were: $\begin{array} { | l | r | } \hline \text { Direct materials } & \$ 475,000 \\\hline \text { Direct labor } & 347,000 \\\hline \text { Indirect materials } & 78,000 \\\hline \text { Indirect labor } & 143,500 \\\hline \text { Sales commissions } & 150,000 \\\hline \text { Factory depreciation } & 260,000 \\\hline \text { Property taxes, factory } & 35,000 \\\hline \text { Factory utilities } & 65,000 \\\hline \text { Advertising } & 62,500 \\\hline \text { Factory supervision } & 185,000 \\\hline\end{array}$ 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.

If a company applies overhead to production with a predetermined overhead rate, a credit balance in the Factory Overhead account at the end of the period means that:

Morris Company applies overhead based on direct labor costs. For the current year, Morris Company estimated total overhead costs to be $400,000, and direct labor costs to be $2,000,000. Actual overhead costs for the year totaled $380,000, and actual direct labor costs totaled $1,800,000. At year-end, Factory Overhead is:

Mesa Corp. allocates overhead to production on the basis of direct labor costs. Mesa's total estimated overhead is $450,000 and estimated direct labor is $180,000. Determine the amount of overhead applied to a job which used $20,000 of direct labor.

A company's file of job cost sheets for jobs that are not yet completed equals the balance in the Work in Process Inventory account.

A company has an overhead application rate of 125% of direct labor costs. How much overhead would be allocated to a job if it required total labor costing $20,000?