Managerial Accounting Canadian 10th Edition by Garrison -Test Bank

Manufacturing overhead was applied at the rate of $25 per machine hour, and Job 1052 required 800 machine hours. In addition, selling and shipping costs of $7,000 were incurred. Job 1052 consisted of 7,000 shirts and was completed on March 24. The total cost of job 1052 transferred from Work in Process to Finished Goods on March 24 is:

What predetermined overhead rates would be used in Departments A and B, respectively?

What predetermined overhead rate would be used in Departments A and B, respectively?

Kelsh estimates that 5,000 direct labour hours and 10,000 machine hours will be worked during the year. What will be the predetermined overhead rate per hour?

Simplex estimates that 10,000 direct labour and 16,000 machine hours will be worked during the year. If overhead is applied on the basis of machine hours, what will be the overhead rate per hour?

CR Company estimated 20,000 labour hours to be worked during the year. Actual labour hours worked were 22,000 hours. If overhead is applied on the basis of direct labour hours, what will be the overhead applied for the year?

In addition, selling and shipping costs of $7,000 were incurred on the job. Manufacturing overhead was applied at the rate of $25 per machine hour, and Job ICU2 required 800 machine hours. If Job ICU2 consisted of 7,000 shirts, what was the Cost of Goods Sold per shirt?

Worrell applies overhead at a predetermined rate of 90% of direct labour cost. Job No. 232, the only job still in process at the end of March, has been charged with manufacturing overhead of $2,250. What was the amount of direct materials charged to Job No. 232?

Overhead is charged to production at 70% of the direct materials cost. Jobs 475, 477, and 478 have been delivered to the customer. What was Samuelson’s Work in Process inventory balance for Job 476 on June 30?

What was the under- or overapplied overhead last year?

What was the under- or overapplied overhead for the year?

Lamprey Company had no beginning or ending inventories. What was the cost of goods manufactured for January?

At the end of the year, the company closes out the balance in the Manufacturing Overhead account to Cost of Goods Sold.

During March, the following activity and amounts were recorded by the company:

Raw materials (all direct materials):

Labour:

Inventories:

Work in Process inventory contains $5,500 of direct labour cost.

Ending inventories:

The company uses a predetermined overhead rate of $5.00 per direct labour hour to apply manufacturing overhead to jobs.

Added During September

The direct labour wage rate is $10 per hour. Overhead is applied at the rate of $5 per direct labour hour. Jobs 1, 2, and 3 have been completed and transferred to finished goods. Job 2 has been delivered to the customer.

Under Summit’s job-order costing system, any over- or underapplied overhead is closed out to the Cost of Goods Sold account at the end of the calendar year (that is, December 31).

Job #461 was completed during the year and the following costs had been incurred on that job:

All of the company’s manufacturing overhead is fixed.

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Operating costs and data for the year included the following:

Required:

a. By how much, if any, was the overhead cost underapplied or overapplied?
b. Prepare a summary journal entry to close any underapplied or overapplied overhead cost to a Cost of Services Provided account.
c. Explain qualitatively and quantitatively (in as much detail as possible) the source(s) of any underapplied or overapplied overhead cost.

Only Job 105 was still in process at the end of the month. This job had been charged with $3,000 in direct materials cost.

Required:

a.) Complete the following for Job 105:

b.) Determine the total amount of materials cost charged to completed jobs during the month.

Required:

Explain to Stan what the Manufacturing Overhead entries on the job cost sheet mean.

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 $231,000 in manufacturing overhead cost. The following transactions were recorded for the year:

a.) Raw materials purchased: $315,000.
b.) Raw materials requisitioned for use in production: $307,000 ($281,000 direct and $26,000 indirect).
c.) The following employee costs were incurred:

d.) Selling costs: $147,000.
e.) Factory utility costs: $10,000.
f.) Depreciation for the year: $127,000, of which $120,000 is related to factory operations and $7,000 is related to selling and administrative activities.
g.) Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34,000 machine hours.
h.) Sales for the year: $1,253,000.

Required:

a. Prepare a schedule of cost of goods manufactured in good form.
b. Was the manufacturing overhead under- or overapplied? By how much?
c. Prepare an income statement for the year in good form. The company closes out any under- or overapplied overhead to Cost of Goods Sold.

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 $248,000 in manufacturing overhead cost. The following transactions were recorded for the year:

a.) Raw materials purchased: $411,000.
b.) Raw materials requisitioned for use in production: $409,000 ($388,000 direct and $21,000 indirect).
c.) The following employee costs were incurred:

d.) Selling costs: $148,000.
e.) Factory utility costs: $12,000.
f.) Depreciation for the year: $121,000, of which $114,000 is related to factory operations and $7,000 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.) Cost of goods manufactured for the year: $783,000.
i.) Sales for the year: $1,107,000; the costs on the job cost sheets of the goods that were sold: $768,000.
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.

The following transactions took place during the year (all purchases and services were acquired on account):

a.) Raw materials purchased: $86,000.
b.) Raw materials requisitioned for use in production (all direct materials): $98,000.
c.) Utility costs incurred in the factory: $15,000.
d.) Salaries and wages incurred as follows:

e.) Maintenance costs incurred in the factory: $15,000.
f.) Advertising costs incurred: $89,000.
g.) Depreciation recorded for the year: $80,000, of which 80% relates to factory assets and the remainder relates to selling and administrative assets.
h.) Rental cost incurred on buildings: $70,000 (75% of the space is occupied by the factory, and 25% is occupied by sales and administration).
i.) Miscellaneous selling and administrative costs incurred: $11,000.
j.) Manufacturing overhead cost was applied to jobs as per company policy.
k.) Cost of goods manufactured for the year: $500,000.
l.) Sales for the year (all on account): $1,000,000. These goods cost $600,000 to manufacture.

Required:

Prepare journal entries to record the information above. Key your entries by the letters a through l.

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.

Required:

What was the balance in Finished Goods inventory at the end of January?

Job 243 entered into production on April 1 and was completed on May 12. The company’s cost records show the following information about the job:

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:

Required:

a.) Compute the predetermined overhead rates for Department A and Department B.
b.) Compute the total overhead cost applied to Job 243.
c.) Compute the amount of underapplied or overapplied overhead in each department at the end of the current year.

During the most recent year, a severe recession in the company’s industry caused 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:

Required:

(a.) Compute the company’s predetermined overhead rate for the year and the amount of under- or overapplied overhead for the year.
(b.) Determine the difference between net income for the year if the under- or overapplied overhead is allocated to the appropriate accounts rather than closed out directly to Cost of Goods Sold.

The company uses a predetermined overhead rate to charge overhead cost to production. The rate for the year just completed was $4.00 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.

1.) Eleven thousand units were sold at $22 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 $4 each.
4.) During the month, two purchases of raw materials were made:
Purchase #1: 7,000 units at $5.00 each
Purchase #2: 6,000 units at $5.50 each
5.) The company uses the first-in, first-out method of determining raw materials inventories.
6.) The work-in-process inventories were:

7.) Direct labour cost was $110,000.
8.) Overhead is applied to production on the basis of 65% of direct labour cost.

Required:

Prepare a schedule of cost of goods manufactured for the month.

Required:

What must have been the estimated direct labor-hours at the beginning of the year used in setting the predetermined overhead rate?

Required:

What must have been the estimated manufacturing overhead cost at the beginning of the year used setting the predetermined overhead rate?

Required:

What must have been the predetermined overhead rate for the year?

X Company used a 150% predetermined overhead rate based on direct labour cost. The rate was based on annual estimated overhead cost and direct labour cost of $252,000 and $168,000, respectively.

Required:

a. Calculate the cost of goods manufactured.
b. What was the cost of goods sold before adjusting for any under or overapplied overhead?
c. By how much was manufacturing overhead cost under or overapplied?
d. Prepare a summary journal entry to close any under or overapplied manufacturing overhead cost to cost of goods sold. Is such an entry appropriate in this situation? Why or why not?
e. Analyze the under or overapplied manufacturing overhead costs calculated in part c above into two separate components: amount due to incorrect estimate of the annual manufacturing overhead costs and an amount due to incorrect estimate of the annual direct labour cost.

Y Company used a predetermined overhead rate based on direct labour hours. Estimated annual manufacturing overhead cost and direct labour hours were $150,000 and 20,000, respectively.

Required:

a. What was the pre-determined manufacturing overhead rate?
b. Calculate the cost of goods manufactured.
c. What was the cost of goods sold before adjusting for any under or overapplied overhead?
d. By how much was manufacturing overhead cost under or overapplied?
e. Prepare a summary journal entry to close any under or overapplied manufacturing overhead cost to cost of goods sold. Is such an entry appropriate in this situation? Why or why not?
f. Analyze the under or overapplied manufacturing overhead costs calculated in part c above into two separate components: amount due to incorrect estimate of the annual manufacturing overhead costs and an amount due to incorrect estimate of the annual direct labour cost.

Manufacturing overhead was applied at the rate of $25 per machine hour, and Job 1052 required 800 machine hours. In addition, selling and shipping costs of $7,000 were incurred. Job 1052 consisted of 7,000 shirts and was completed on March 24. The total cost of job 1052 transferred from Work in Process to Finished Goods on March 24 is:

OH applied = 2,400 – 1,400 = 1,000 and rate = 1,000/800 = 1.25 or 125%

OH rate = $150,000/10,000 hrs = $15/hr.
Applied = 12,000 hours @ $15/hr = $180,000
Less the actual overhead of $186,000 = underapplied overhead of $6,000

Rate = $400,000/100,000 hrs. = $4/hr.
Applied = 90,000 hrs @$4/hr. = $360,000
Actual OH = $350,000 therefore overapplied by $10,000

Applied overhead = $150,000 + $6,000 = $156,000
DL Hours = $156,000/$8/hr = 19,500 hours

OH rate = $255,000/100,000 hrs. = $2.55/hr.
Applied = 105,000 hrs @ $2.55/hr = $267,750
Actual overhead = $270,000 therefore Underapplied $2,250

OH rate = $330,000/55,000 DLH = $6/DLH
Applied = 57,000 DLH @ $6/DLH = $342,000

What predetermined overhead rates would be used in Departments A and B, respectively?

Dept. A = $60,000/$30,000 = 200% Dept. B = $50,000/10,000 m. hrs = $5/m. hr.

What predetermined overhead rate would be used in Departments A and B, respectively?

Dept. A = $67,200/$56,000 = 120% Dept. B = $45,000/15,000 m. hrs = $3/m. hr.

Kelsh estimates that 5,000 direct labour hours and 10,000 machine hours will be worked during the year. What will be the predetermined overhead rate per hour?

($20,000 + 4,000 + 10,000)/10,000 m. hrs. = $3.40/m.hr.

Simplex estimates that 10,000 direct labour and 16,000 machine hours will be worked during the year. If overhead is applied on the basis of machine hours, what will be the overhead rate per hour?

(35,000 + 5,000 + 16,000)/16,000 m.hrs = $3.5/m.hr.

CR Company estimated 20,000 labour hours to be worked during the year. Actual labour hours worked were 22,000 hours. If overhead is applied on the basis of direct labour hours, what will be the overhead applied for the year?

OH rate = (15,000 + 8,000 + 10,000 + 12,000)/20,000 hrs. = $2.25/hr.
Applied = 22,000 hrs. @ $2.25/hr = $49,500

In addition, selling and shipping costs of $7,000 were incurred on the job. Manufacturing overhead was applied at the rate of $25 per machine hour, and Job ICU2 required 800 machine hours. If Job ICU2 consisted of 7,000 shirts, what was the Cost of Goods Sold per shirt?

Total Cost = DM + DL + OH applied = 13,700 + 4,800 + (800 hrs @$25/hr) = $38,500. CGS = $38,500/7,000 shirts = $5.50/shirt

Worrell applies overhead at a predetermined rate of 90% of direct labour cost. Job No. 232, the only job still in process at the end of March, has been charged with manufacturing overhead of $2,250. What was the amount of direct materials charged to Job No. 232?

WIP ending inv. = 12,000 + 40,000 + 30,000 + 27,000 – 100,000 = $9,000
DL = 2250/.9 = $2,500. DM = $9,000 – 2500 – 2250 = $4,250

Overhead is charged to production at 70% of the direct materials cost. Jobs 475, 477, and 478 have been delivered to the customer. What was Samuelson’s Work in Process inventory balance for Job 476 on June 30?

WIP inv. June 30 Balance = 900 + 600 + 800 + (600 * .7) = $2,720

DL = 10,000/1.25 = $8,000

Adjusted cost of goods sold = $360,000 – 3,000 overapplied = $357,000

$21,000/.7 = $30,000.

What was the under- or overapplied overhead last year?

(24,000@ $2) – 47,000 = $1,000 overapplied

$156,000 – 12,600 = $144,000 applied. Actual hours worked = $144,000/$6/hr. = 24,000 hrs.

What was the under- or overapplied overhead for the year?

$90,000 – (25,000 @ $3.50) = $2,500 underapplied.

DL hours worked = $10,000/$1.25 per hour = 8,000 hours.
Total cost = $86,000 + (8,000 hrs. @ $15/hr) + $10,000 = $216,000

$28,000/$0.70/hr = 40,000 machine hours.

Total transferred out of WIP (credit) = 15,000 + 30,000 + 25,000 + 30,000 – 18,000
Therefore debit Finished Goods $82,000

Lamprey Company had no beginning or ending inventories. What was the cost of goods manufactured for January?

CGM = 90,000 + 107,000 + 113,000 = $310,000.

DM used = 4,000 + 20,000 – 3,000 = $21,000

Although the actual overhead should have been $6,000 greater and therefore overapplied overhead of $4,000 the effect on NI is zero because the depreciation was still deducted (as an operating expense instead of CGS) to compute NI therefore no error on the NI amount.

At the end of the year, the company closes out the balance in the Manufacturing Overhead account to Cost of Goods Sold.

The debit to OH represents the indirect labour of $5,000. Credit to Wages and Salaries payable i.e.$30,000. Debit WIP = DL $15,000, Debit sales Salaries expense = 10,000 and debit OH = $5,000.

This is the debit to finished goods and the credit to WIP which represents CGM = $50,000.

Total debits to Man. OH = $29,000 = actual less #6 applied 28,000 = $1,000 underapplied. From Fin. Goods t-account the unadjusted CGS = 17,000 + 50,000 – 12,000 = $55,000. Therefore CGS adjusted = 55,000 + 1,000 underapplied = $56,000.

transaction #6 MOH applied = $28,000.

WIP account transaction #2 = $12,000.

From WIP t-account; 8,000 + 12,000 + 15,000 + 28,000 – 50,000 = $13,000.

DM + DL + OH applied = 12,000 + 15,000 + 28,000 = $55,000

During March, the following activity and amounts were recorded by the company:

Raw materials (all direct materials):

Labour:

Inventories:

Work in Process inventory contains $5,500 of direct labour cost.

DM = WIP e.i. – DL – OH applied = 14,500 – 5500 – (5500 * .7) = $5,150

CGM = 2,000 + 2,500 + 1750 + 30,500 + 26,500 + (26,500 * .7) – 14,500 = $67,300

OH applied = 26,500 * .7 = 18,550 less actual of 18,500 = $50 overapplied.

Op.RM inventory = 7,500 + 30,500 – 29,500 = $8,500

Ending inventories:

The company uses a predetermined overhead rate of $5.00 per direct labour hour to apply manufacturing overhead to jobs.

Actual OH = 9,000 hrs. @$5/hr = $45,000 less overapplied 5,000 = $40,000

Total cost = 14,000 + 47,000 + (9,000 hrs @$5) = $106,000

CGM = 14,000 + 47,000 + (9,000 hrs @$5) = $106,000 less 50,000 E.I = $56,000.

RM purchased = 85,000 + 326,000 – 75,000 = $336,000.

MC – RM used = 686,000 – 326,000 = $360,000, therefore DL cost = 360,000/1.6 = $225,000.

CGM = 80,000 + 686,000 – 30,000 = $736,000

CGS = 90,000 + (80,000 + 686,000 – 30,000) – 110,000 = $716,000

RM used in production = 21,000 + 71,000 – 26,000 = $66,000.

OH applied = OH actual since no variance.
CGM = 66,000 + 27,000 + 21,000 + 20,000 – 13,000 = $121,000

CGM = 121,000 as in previous question no.56;
CGS = 30,000 + 121,000 – 40,000 = $111,000.

Added During September

The direct labour wage rate is $10 per hour. Overhead is applied at the rate of $5 per direct labour hour. Jobs 1, 2, and 3 have been completed and transferred to finished goods. Job 2 has been delivered to the customer.

Direct labour hours = $400/$10 per hour = 40 hours.
Job 4 = EI = 750 + 4,000 + 400 + 40 hrs @ $5/hr = $5,350.

CGM = total cost of jobs 1, 2 and 3 BI + DM + DL + OH applied
= 2,900 + 2,050 + 650 + (650 * $5/$10) = $5,925

CGS = total cost of Job #2 = 1,400 + 250 + 300 + (300 * $5/$10) = $2,100.

Under Summit’s job-order costing system, any over- or underapplied overhead is closed out to the Cost of Goods Sold account at the end of the calendar year (that is, December 31).

DM purchased = 30,000 + 190,000 – 40,000

DL = 515,000 + 20,000 – 15,000 – 190,000 – 150,000 = $180,000

Beginning FG = 28,000 + 110,000 – 125,000 = $13,000.

Actual MOH = 26,500 – 4,500 overapplied = $22,000

Job #461 was completed during the year and the following costs had been incurred on that job:

DLH = $1,500/$5/DLH = 300 hrs.
OH rate = $50,000/20,000 DLH = $2.5.
Cost of Job = 4,000 + 1,500 + (300 hrs. @ $2.50/hr) = $6,250
Therefore $6,250/100 units = $62.50 per unit.

Applied = 24,000 hrs @ $2.50/hr. = $60,000 – 54,000 actual = $6,000 overapplied.

Actual hours – estimated hours = 4,000 hours @ $2.50/hr = $10,000. See page 173 for brief explanation of causes. Causes are explained further in chapter 10.