Managerial Accounting The Cornerstone of Business Decisions International Edition 4th Edition by Maryanne M. Mowen - Test Bank

Managerial Accounting The Cornerstone of Business Decisions International Edition 4th Edition by Maryanne M. Mowen – Test Bank

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Chapter 5—Job-Order Costing

TRUE/FALSE

Manufacturing and service firms producing unique products or services require job-order accounting systems.

ANS: T PTS: 1 DIF: Easy OBJ: 5-1

NAT: AACSB Analytic | AICPA FN-Reporting | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

The key feature of job-order costing is that the cost of one job differs from that of another job and must be kept track of separately.

ANS: T PTS: 1 DIF: Easy OBJ: 5-1

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Production costs consist of direct materials, direct labor, and overhead.

ANS: T PTS: 1 DIF: Easy OBJ: 5-1

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-27-Managerial Accounting Features/Costs

The difference between actual overhead and applied overhead is called an overhead variance.

ANS: T PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

If actual overhead is greater than applied overhead, the variance is called underapplied overhead.

ANS: T PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Costs reported on the financial statements must be estimated costs.

ANS: F PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Reporting | IMA-Cost Management | ACBSP-APC-27-Managerial Accounting Features/Costs

If the overhead variance is immaterial, it is allocated among the ending balances of Work in Process, Finished Goods, and Cost of Goods Sold.

ANS: F PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Departmental overheads cannot be added together to get plantwide overhead.

ANS: F

Departmental overheads can be added together to get plantwide overhead.

PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

In an actual cost system, actual direct materials, actual direct labor and estimated overhead are used to determine unit cost.

ANS: F PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

A job-order cost sheet is the source document where direct labor costs are assigned to individual jobs.

ANS: F PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Reporting | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Using a time ticket, the cost accounting department can enter the cost of direct materials onto the correct job-order cost sheet.

ANS: F PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

The work-in-process account consists of all the job-order cost sheets for the completed jobs.

ANS: F

The work-in-process account consists of all the job-order costs sheets for the unfinished jobs.

PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

There are other source documents besides the time ticket and the material requisition form used to fill out the job-order cost sheet.

ANS: T PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Reporting | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

The raw materials account is an inventory account located on the income statement.

ANS: F PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Reporting | IMA-Cost Management | ACBSP-APC-09-Financial Statements

The three manufacturing cost elements are direct materials, direct labor, and overhead.

ANS: T PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA BB-Industry | IMA-Cost Management | ACBSP-APC-27-Managerial Accounting Features/Costs | ACBSP-APC-34-Job Order Costing

The use of normal costing means that actual overhead costs are assigned directly to jobs.

ANS: F

The use of normal costing means that actual overhead costs are not assigned directly to jobs. Estimated overhead is used in a normal costing system. Actual overhead is recorded to the overhead control account and then at the end of the period if the variance is immaterial it is closed to cost of goods sold.

PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

The use of a departmental rate has the advantage of being simple and reduces data collection requirements.

ANS: F PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Actual overhead is reconciled with applied overhead at the beginning of the period.

ANS: F

Actual overhead is reconciled with applied overhead at the end of the period.

PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Actual overhead is used to arrive at the cost of goods manufactured.

ANS: F PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

The cost of goods sold appearing on the income statement as an expense is the normal cost of goods sold.

ANS: F

The cost of goods sold before an adjustment for an overhead variance is called normal cost of goods sold. After the adjustment for the period’s overhead variance takes place it is called adjusted cost of goods sold, which is the amount that appears on the income statement.

PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

When materials are put into production, they are taken from the Raw Materials account and put into the Work in Process account.

ANS: T PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic |AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

Overhead costs are assigned to Finished Goods using a predetermined rate.

ANS: F

Overhead costs are assigned to Work in Process using a predetermined rate.

PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic |AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

Actual overhead costs are accumulated in the overhead control account.

ANS: T PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

The cost of completed units is always debited to Work-in-Process and credited to Finished Goods.

ANS: F

The cost of completed units is credited to Work-in-Process and debited to Finished Goods.

PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

The journal entry for $17,000 materials purchased on account is:

Raw Materials	17,000

Accounts Payable		17,000

ANS: T PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

In job-order costing, the journal entry for $7,200 raw materials requisitioned for use in production is:

Work in Process	7,200

Raw Materials		7,200

ANS: T PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

In job-order costing, the journal entry for $1,700 of unpaid direct labor is:

Work in Process	1,700

Wages Payable		1,700

ANS: T PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

In job-order costing, the journal entry for overhead applied at the rate of $3 per direct labor hour when 210 direct labor hours were worked is:

Work in Process	630

Applied Overhead		630

ANS: F

The journal entry for overhead applied at the rate of $3 per direct labor hour when 210 direct labor hours were worked is:

Work in Process	630

Overhead Control		630

PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

In job-order costing, the journal entry for a completed job costing $7,000 but not sold is:

Finished Goods	7,000

Work in Process		7,000

ANS: T PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

The journal entry for $17 of underapplied overhead is:

Cost of Goods Sold	17

Applied Overhead		17

ANS: F

The journal entry for $17 of underapplied overhead is:

Cost of Goods Sold	17

Overhead Control		17

PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

MATCHING

Match each item with the correct statement below.

a.	actual cost system
b.	job-order costing system
c.	normal cost system
d.	process-costing system

An approach that assigns the actual costs of direct materials and direct labor to products but uses a predetermined rate to assign overhead costs

An approach that assigns actual costs of direct materials, direct labor, and overhead to products

A costing system in which costs are collected and assigned to units of production for each individual job

A costing system that accumulates production costs by process or by department for a given period of time

ANS: C PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: A PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: B PTS: 1 DIF: Easy OBJ: 5-1

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: D PTS: 1 DIF: Easy OBJ: 5-1

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-35-Process Costing

Match each item with the correct statement below.

a.	predetermined overhead rate
b.	plantwide overhead rate
c.	departmental overhead rate
d.	overhead variance
e.	overapplied overhead
f.	underapplied overhead
g.	applied overhead
h.	normal cost of goods sold

Overhead assigned to production using predetermined rates

An overhead rate computed using estimated data

The amount by which actual overhead exceeds applied overhead

The difference between actual overhead and applied overhead

The amount by which applied overhead exceeds actual overhead

A single overhead rate calculated using all estimated overhead for a factory divided by the estimated activity level across the entire factory

Estimated overhead for a single department divided by the estimated activity level for that same department

ANS: G PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: A PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: F PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: D PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: E PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: B PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: C PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Match each item with the correct statement below. Answers may be used more than once.

a.	Job-order cost sheet
b.	Time ticket
c.	Materials requisition form

The job order number, or name, head this form.

This form asks for the type, quantity, and unit price of direct materials.

This form is filled out by each employee every day.

Every time a new job is started this is prepared.

This form may be used to maintain proper control over a firm’s inventory of direct materials.

ANS: A PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: C PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: B PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: A PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: C PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Match the following cost flows with the proper event in a job-costing firm:

a.	completion of job
b.	end of each accounting period
c.	materials are moved from storage into production
d.	product is sold
e.	end of year

direct materials, direct labor and applied overhead are totaled to yield manufacturing cost of job

the costs of job are transferred from the work-in-process account to finished goods account

actual overhead is reconciled with applied overhead

cost of materials is removed from materials account and added to work-in- process account

costs of product are removed from finished goods and added to cost of goods sold

schedule of costs of goods sold is prepared

immaterial overhead variance closed to costs of goods sold

ANS: A PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: A PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement |IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: B PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: C PTS: 1 DIF: Moderate OBJ: 5.4

NAT: AACSB Analytic | IMA-Cost Management

ANS: D PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: B PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ANS: E PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

COMPLETION

A _______ is one distinct unit or set of units.

ANS: job

PTS: 1 DIF: Easy OBJ: 5-1

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

In a _______________________________ costs are accumulated by job.

ANS: Job-order costing system

PTS: 1 DIF: Easy OBJ: 5-1

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

__________________________ is a costing system that accumulates production costs by process or by department for a given period of time.

ANS: Process-costing system

PTS: 1 DIF: Easy OBJ: 5-1

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

Strict ______________________ are rarely used because they cannot provide accurate unit cost information on a timely basis.

ANS: actual cost systems

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

A(n) ___________________________ determines unit cost by adding actual direct materials, actual direct labor, and estimated overhead.

ANS: normal cost system

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

The ___________________________ is calculated at the beginning of the year by dividing the total estimated annual overhead by the total estimated level of cost driver.

ANS: predetermined overhead rate

PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

_________________ is found by multiplying the predetermined overhead rate by the actual use of the associated activity for the period.

ANS: Applied overhead

PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

The difference between actual overhead and applied overhead is called a (n) _________________.

ANS: overhead variance

PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

If actual overhead is greater than applied overhead, then the variance is called ___________________.

ANS: underapplied overhead

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

A _____________________ is a single overhead rate calculated by using all estimated overhead for a factory divided by the estimated activity level across the entire factory.

ANS: plantwide overhead rate

PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

The _____________________ is subsidiary to the work-in-process account and is the primary document for accumulating all costs related to a particular job.

ANS: job-order cost sheet

PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

A __________________________ is used by the cost accounting department to enter the cost of direct materials onto the correct job-order cost sheet.

ANS: materials requisition form

PTS: 1 DIF: Moderate OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

A source document by which direct labor costs are assigned to individual jobs is known as a _______________.

ANS: time ticket

PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

The cost of goods sold before an adjustment for an overhead variance is called ____________________.

ANS: normal cost of goods sold

PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

_________________________ is the amount that appears as an expense on the income statement after the adjustment for the period’s overhead variance is recorded.

ANS: Adjusted cost of goods sold

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

When materials are requested for production the cost is removed from ____________ and added to ____________.

ANS: raw materials, work-in-process

PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

Applied overhead costs are charged to ________________.

ANS: Work in Process

PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

When units are sold, their total cost is debited to _______________ and credited to ____________.

ANS: Cost of Goods Sold, Finished Goods

PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

________________________ are directly responsible for creating the products or services sold to customers.

ANS: Producing departments

PTS: 1 DIF: Easy OBJ: 5-6

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

The ____________________ of allocation recognizes all interactions among support departments.

ANS: reciprocal method

PTS: 1 DIF: Moderate OBJ: 5-6

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Decision Analysis | ACBSP-APC-34-Job Order Costing

MULTIPLE CHOICE

Which of the following is not a characteristic of job-order costing?

a.	Wide variety of distinct products
b.	Unit cost is computed by dividing process costs of the period by the units produced in the period
c.	Unit cost is computed by dividing total job costs by units produced on that job
d.	Costs accumulated by job
e.	typically, the cost of one job is different from that of another job

ANS: B PTS: 1 DIF: Moderate OBJ: 5-1

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

How are unit costs calculated?

a.	by dividing total cost associated with the units produced by the unit cost
b.	by adding all variable costs per unit associated with the units produced
c.	by dividing total fixed costs by the number of units produced
d.	by dividing total cost associated with the units produced by the number of units produced
e.	by adding unit variable costs to total fixed costs

ANS: D PTS: 1 DIF: Easy OBJ: 5-1

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Production costs do not include:

a.	direct materials
b.	direct labor
c.	variable overhead
d.	fixed overhead
e.	all of these are production costs.

ANS: E PTS: 1 DIF: Easy OBJ: 5-1

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which of the following are easy to trace to individual jobs?

a.	direct materials and overhead
b.	direct materials and direct labor
c.	direct labor and overhead
d.	overhead and indirect labor
e.	depreciation on machinery and indirect labor

ANS: B PTS: 1 DIF: Easy OBJ: 5-1

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Firms in the ____ business are most likely to use a process-costing system.

a.	Printing
b.	Dental
c.	Construction
d.	Petroleum
e.	Automobile repair

ANS: D PTS: 1 DIF: Easy OBJ: 5-1

NAT: AACSB Analytic | AICPA BB-Industry | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which of the following is the assignment process used with normal costing?

a.	Actual direct materials, actual direct labor and actual overhead cost are assigned to products.
b.	Actual direct materials cost is assigned to products, but direct labor and overhead costs are assigned using predetermined rates.
c.	Actual direct labor cost is assigned to products, but direct material and overhead costs are assigned using predetermined rates.
d.	Actual direct material and direct labor costs are assigned to products, but overhead costs are assigned using predetermined rates.
e.	all manufacturing costs are assigned using predetermined rates

ANS: D PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which method of measuring costs associated with production is more widely used in practice?

a.	Normal Costing
b.	Actual Costing
c.	Both are used equally.
d.	Neither one is used.
e.	cannot be determined

ANS: A PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which type of cost poses the most problems in using an actual cost system?

a.	Direct materials
b.	Overhead
c.	Direct labor
d.	All of these are correct.
e.	None of these are correct.

ANS: B PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which of the following statements is true about overhead?

a.	Overhead costs are not incurred uniformly throughout the year.
b.	Overhead costs have a definite, identifiable relationship with units produced.
c.	Low production in one month would give rise to low unit overhead costs.
d.	All of these are correct.
e.	None of these are correct.

ANS: A PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Figure 5-1.

Morrow Company applies overhead based on direct labor hours. At the beginning of the year, Morrow estimates overhead to be $620,000, machine hours to be 180,000, and direct labor hours to be 40,000. During February, Morrow has 4,200 direct labor hours and 8,000 machine hours.

Refer to Figure 5-1. What is the predetermined overhead rate?

a.	$3.44 per machine hour
b.	$147.62 per direct labor hour
c.	$15.50 per direct labor hour
d.	$77.50 per machine hour
e.	none of these are correct

ANS: C

Predetermined overhead rate = $620,000/40,000 = $15.50 per direct labor hour

PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-1. What is the amount of overhead applied for February?

a.	$65,100
b.	$42,000
c.	$24,000
d.	$78,200
e.	$66,410

ANS: A

Predetermined rate = $15.50 per direct labor hour

Applied overhead = $15.50 x 4,200 = $65,100

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-1. If the actual overhead for February is $64,700, what is the overhead variance and is it overapplied or underapplied?

a.	$400 underapplied
b.	$200 overapplied
c.	$1,000 underapplied
d.	$400 overapplied
e.	$600 overapplied

ANS: D

$64,700 – $65,100 = $400 overapplied

PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Figure 5-2.

At the beginning of the year, Kyla Inc. estimated that overhead would be $880,000 and direct labor hours would be 220,000. At the end of the year, actual overhead was $920,600 and there were actually 230,000 direct labor hours.

Refer to Figure 5-2. What is the overhead variance?

a.	$600 underapplied
b.	$600 overapplied
c.	$200 underapplied
d.	$400 overapplied
e.	$800 underapplied

ANS: A

Predetermined overhead rate = $880,000/220,000 = $4 per direct labor hour

Applied overhead = $4 x 230,000 = $920,000

Overhead variance = $920,600 – $920,000 = $600 Underapplied overhead

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-2. What is the predetermined overhead rate?

a.	$4 per direct labor hour
b.	$2.63 per direct labor hour
c.	$4.18 per direct labor hour
d.	$880,000
e.	none of these are correct

ANS: A

Predetermined overhead rate = $880,000/220,000 = $4 per direct labor hour

PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Figure 5-3.

Mitchell’s Softball Gloves Company estimated the following at the beginning of the year:

	Assembly Department	Testing Department	Total
Overhead	$570,000	$130,000	$700,000
Direct Labor Hours	142,500	32,500	175,000
Machine Hours	32,000	65,000	97,000

Mitchell uses departmental overhead rates. In the assembly department, direct labor hours are used to apply overhead. Machine hours are used to apply overhead in the testing department.

Actual data for August is as follows:

	Assembly Department	Testing Department	Total
Overhead	$42,000	$12,000	$54,000
Direct Labor Hours	13,500	2,430	15,930
Machine Hours	4,020	11,000	15,020

Refer to Figure 5-3. If Mitchell uses a plantwide overhead rate based on direct labor hours, instead of departmental rates, what is the predetermined overhead rate rounded to the nearest cent?

a.	$5 per direct labor hour
b.	$7.22 per machine hour
c.	$4 per direct labor hour
d.	$2.57 per direct labor hour
e.	$.52 per direct labor hour

ANS: C

Predetermined overhead rate = $700,000/$175,000 = $4 per direct labor hour

PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-3. Using departmental overhead rates, which of the following is correct?

a.	Applied overhead for the assembly department is $54,000.
b.	Applied overhead for the testing department is $4,860.
c.	Applied overhead for both departments combined is $63,720.
d.	Overhead for the assembly department is underapplied.
e.	none of these are correct.

ANS: A

Assembly applied overhead = $4 per direct labor hour ´ 13,500 direct labor hours = $54,000

Testing applied overhead = $2 per machine hour ´ 11,000 = $22,000

Combined applied overhead = $54,000 + $22,000 = $76,000

Overhead for the assembly department is overapplied ($54,000 applied – $42,000 actual)

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-3. Mitchell decides to continue using departmental overhead rates. What are the predetermined rates for the Assembly and Testing departments respectively?

a.	Assembly: $4 per direct labor hour; Testing: $2 per machine hour
b.	Assembly: $2 per direct labor hour; Testing: $4 per machine hour
c.	Assembly: $4 per direct labor hour; Testing: $4 per direct labor hour
d.	Assembly: $7.22 per machine hour; Testing: $7.22 per machine hour
e.	none of these

ANS: A

Assembly:

$570,000/142,500 = $4 per direct labor hour

Testing:

$130,000/65,000 = $2 per machine hour

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-3. Mitchell decides to continue using departmental overhead rates. If a job spends 4 hours in assembly and 3 hours in testing, what is the amount of overhead charged to the job?

a.	$22
b.	$20
c.	$28
d.	$50.54
e.	none of these

ANS: A

($4 ´ 4 hrs) + ($2 ´ 3 hrs) = $22

PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

The predetermined overhead rate is calculated by:

a.	Estimated annual overhead/Estimated manufacturing cost
b.	Actual annual overhead/Estimated annual activity level
c.	Estimated annual overhead/Actual annual activity level
d.	Actual annual overhead/Actual annual activity level
e.	Estimated annual overhead/Estimated annual activity level

ANS: E PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

The overhead variance is least likely to be

a.	zero (actual overhead equals applied overhead).
b.	underapplied.
c.	overapplied.
d.	immaterial.
e.	underapplied and material.

ANS: A PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

The unit cost of a job consists of the total costs of

a.	materials used on the job.
b.	labor worked on the job.
c.	applied overhead.
d.	All of these are correct.
e.	None of these are correct.

ANS: D PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Smith has applied overhead of $73,000 and actual overhead of $87,600 for the month of November. It applies overhead based on direct labor hours and those equaled 14,600 in November. Overhead for the year was estimated to be $900,000. How many direct labor hours were estimated for the year?

a.	175,200
b.	180,000
c.	$5
d.	150,000
e.	$6

ANS: B

Predetermined overhead rate = $73,000/14,600 = $5 per direct labor hour

Direct labor hours = $900,000/$5 per direct labor hour = 180,000

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

At the beginning of the year, Wilson Company estimated the following:

Overhead	$360,000
Direct labor hours	60,000

Wilson used normal costing and applies overhead on the basis of direct labor hours. For the month of September, direct labor hours equaled 9,350 and actual overhead equaled $46,750.

Calculate the overhead applied to production in September.

a.	$56,100
b.	$30,000
c.	$46,750
d.	$5 per direct labor hour
e.	none of these

ANS: A

Predetermined overhead rate = $360,000/60,000 = $6 per direct labor hour

Applied overhead = $6 ´ 9,350 = $56,100

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

On February 1, Job 12 had a beginning balance of $200. During February, direct materials of $500 and direct labor of $200 were added to the job. Overhead is applied to production at a rate of 55% of direct labor. There are 5 units in Job 12.

What is the unit cost?

a.	$202
b.	$1,010
c.	$162
d.	$810
e.	none of these

ANS: A

Beginning balance	$ 200
DM	500
DL	200
OH	110
Total	$1,010

$1010/5 = $202

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Manufacturing overhead

a.	consists of all costs other than direct materials.
b.	consists of all manufacturing costs other than direct materials.
c.	consists of all costs other than direct materials and direct labor.
d.	consists of all manufacturing costs other than direct materials and direct labor.

ANS: D PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

The predetermined overhead rate is usually calculated

a.	at the end of each month.
b.	at the beginning of each month.
c.	at the beginning of the year.
d.	at the end of the year.

ANS: C PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

A normal job-order costing system is a system that uses:

a.	actual costs for direct materials and estimated costs for direct labor and overhead.
b.	estimated costs for direct materials, direct labor, and overhead.
c.	actual costs for direct materials and direct labor and estimated costs for overhead.
d.	actual costs for direct materials and overhead, estimated costs for direct labor.

ANS: C PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

The Kraig Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production	$4,000
Direct labor hours worked	50 hours
Direct labor rate per hour	$ 15
Machine hours worked	100 hours

Plantwide overhead is applied using a plant-wide rate based on direct labor hours. Plantwide overhead was budgeted at $60,000 for the year and the direct labor hours were estimated to be 15,000. Job XY5 consists of 50 units. What is overhead cost assigned to Job XY5?

a.	$200
b.	$400
c.	$750
d.	$1,500

ANS: A

SUPPORTING CALCULATIONS:

$60,000/15,000 = $4; $4 ´ 50 = $200

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Carlson Company uses a predetermined rate to apply overhead. At the beginning of the year, Carlson estimated its overhead costs at $240,000, direct labor hours at 40,000, and machine hours at 10,000. Actual overhead costs incurred were $249,280, actual direct labor hours were 41,000, and actual machine hours were 11,000.

If the predetermined overhead rate is based on machine hours, what is the total amount credited to the plantwide overhead account for the year for Carlson?

a.	$249,280
b.	$246,000
c.	$240,000
d.	$264,000

ANS: D

SUPPORTING CALCULATIONS:

$24 ´ 11,000 = $264,000

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

The document that lists the total cost for a single job is a

a.	job-order cost sheet.
b.	materials requisition form.
c.	time ticket.
d.	purchase order.
e.	none of these are correct.

ANS: A PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which of the following is true about the job-order cost sheet?

a.	It is prepared for every job.
b.	It is subsidiary to the work-in-process account.
c.	It is the primary document for accumulating all costs related to a particular job.
d.	It contains all information pertinent to a job.
e.	All of these are correct.

ANS: E PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which of the following is not on a time ticket?

a.	Employee’s name
b.	Employee’s wage rate
c.	Hours worked on each job
d.	Cost of materials
e.	All of these are on a time ticket

ANS: D PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which form asks for type, quantity, unit price of direct materials issued, and for the number of the job?

a.	time ticket
b.	materials requisition form
c.	job-order cost sheet
d.	None of these are correct.
e.	All of these are correct.

ANS: B PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

A source document that would not be used to help decide the cost of a job is (are)

a.	a material requisition form.
b.	a time ticket for direct labor.
c.	a time ticket for indirect labor.
d.	a material requisition form and a time ticket for direct labor.
e.	all items listed are helpful to decide the cost of a job.

ANS: C PTS: 1 DIF: Moderate OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which of the following costs is not included on a job-order cost sheet?

a.	direct material costs
b.	applied plantwide overhead costs
c.	direct labor costs
d.	actual plantwide overhead costs

ANS: D PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

What items may be on a materials requisition form to maintain proper control over a firm’s inventory of direct materials?

a.	cost of supplies
b.	cost of lubricants for production machinery
c.	the date and a signature
d.	all of these are correct
e.	none of these are correct

ANS: C PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Time tickets are filled out for

a.	indirect laborers.
b.	direct laborers.
c.	both direct laborers and indirect laborers.
d.	direct materials.
e.	supervisors.

ANS: B PTS: 1 DIF: Easy OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which of the following is not true about job-order costing?

a.	It is used in firms that produce homogeneous products.
b.	The cost of each job is accumulated on the job-order cost sheet.
c.	The key document for accumulating manufacturing costs is the job-order cost sheet.
d.	All of these are correct.
e.	None of these are correct.

ANS: A PTS: 1 DIF: Easy OBJ: 5-1 | 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which of the following can serve as a subsidiary ledger for the finished goods inventory?

a.	Completed job-order cost sheets
b.	incomplete job-order cost sheets
c.	work-in-process inventory
d.	raw material inventory
e.	All of these are correct.

ANS: A PTS: 1 DIF: Moderate OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which of the following statements is true?

a.	There will be many different jobs on a job-order cost sheet.
b.	Direct labor is allocated to jobs along with overhead using a cost driver.
c.	Work-in-process consists of all complete work.
d.	Time tickets are used to post the cost of direct labor to individual jobs.
e.	None of these.

ANS: D PTS: 1 DIF: Moderate OBJ: 5-3

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Labor cost flows reflect

a.	direct labor cost.
b.	indirect labor cost.
c.	administration cost.
d.	both indirect and direct labor cost.
e.	administration cost and indirect cost.

ANS: A PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Sanders Manufacturing has the following amounts listed before reconciling the overhead variance.

Estimated overhead	$760,000
Applied overhead	756,000
Actual overhead	740,000
Cost of goods sold	935,000

Assuming that any overhead variance is immaterial, calculate the adjusted Cost of Goods Sold after adjusting for the overhead variance.

a.	$919,000
b.	$951,000
c.	$939,000
d.	$955,000
e.	$915,000

ANS: A

Applied Overhead	$756,000
Actual Overhead	740,000
Overapplied Overhead	$ 16,000

Adjusted Cost of Goods Sold = $935,000 – $16,000 = $919,000

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Using normal costing requires that

a.	actual overhead costs are not assigned directly to jobs.
b.	predetermined rates are not used to assign overhead.
c.	applied overhead is not calculated on a job specific basis.
d.	Neither plantwide or departmental rates can be used to assign overhead.
e.	All of these are correct.

ANS: A PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Using normal costing, which costs never enter the work-in-process account?

a.	Applied Overhead
b.	Actual Overhead
c.	Direct Materials
d.	Direct Labor
e.	None of these.

ANS: B PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Using normal costing, which of the following is false about actual overhead?

a.	Actual overhead is recorded to the overhead control account during the period.
b.	It is reconciled at the end of a period with applied overhead.
c.	It is separated into many smaller accounts, such as indirect labor, supplies, etc.
d.	All of these are correct.
e.	None of these.

ANS: C PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

When a job is completed but not sold, the accounts affected are

a.	Raw Materials and Work-in-Process.
b.	Work-in-Process and Finished Goods.
c.	Work-in-Process and Cost of Goods Sold.
d.	Finished Goods and Cost of Goods Sold.
e.	Finished Goods and Overhead Control.

ANS: B PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

A schedule that is used to ensure accuracy in computing product costs is (are)

a.	the schedule of the cost of goods manufactured.
b.	the schedule of the cost of goods sold.
c.	the schedules of the cost of goods manufactured and cost of goods sold.
d.	the schedule of raw materials used.
e.	none of the schedules listed here.

ANS: A PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which account can sometimes be skipped when a good is produced for a particular customer?

a.	Raw materials
b.	Work-in-process
c.	Finished goods
d.	Cost of goods sold
e.	Accounts can never be skipped

ANS: C PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

The order that cost elements flow through accounts until they are recognized as an expense is

a.	Work-in-Process, Cost of Goods Sold, Finished Goods
b.	Finished Goods, Work-in-Process, Cost of Goods Sold
c.	Finished Goods, Cost of Goods Sold, Work-in-Process
d.	Work-in-Process, Finished Goods, Cost of Goods Sold
e.	None of these are correct

ANS: D PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which of the following is not a manufacturing cost element?

a.	Direct Materials
b.	Direct Labor
c.	Advertising expense
d.	Overhead
e.	All of these are correct

ANS: C PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which of the following sentences is not true?

a.	Actual overhead costs always enter the Work-in-Process account.
b.	The cost of a job includes direct materials, direct labor, and applied overhead.
c.	When a job is complete, it must leave Work-in-Process and be entered into Finished Goods or Cost of Goods Sold.
d.	All of these are correct.
e.	None of these are correct.

ANS: A PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Which of the following is true?

a.	The adjusted cost of goods sold is equal to normal cost of goods sold plus or minus the overhead variance.
b.	If the overhead variance shows overapplied overhead, then that amount would be subtracted from normal cost of goods sold.
c.	Variances in overhead are expected every month.
d.	All of these.
e.	None of these.

ANS: D PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Costs associated with selling and general administrative activities are not

a.	period costs.
b.	nonmanufacturing costs.
c.	manufacturing costs.
d.	period costs and nonmanufacturing costs.
e.	any of these.

ANS: C PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Ring Company designs and builds jewelry. During June it had applied overhead of $120,000. Overhead is applied at the rate of 75% of direct labor cost. Direct labor wages average $20 per hour.

How many direct labor hours did Ring Company have for the month of June?

a.	12,000
b.	6,000
c.	10,000
d.	8,000
e.	9,000

ANS: D

$120,000/75% = $160,000 direct labor cost

$160,000/$20 per hour = 8,000 direct labor hours

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Bryant Company designs and builds fancy dining room tables for individual customers. On July 1, there were two jobs in process: Job 391 with a beginning balance of $21,700 and Job 392 with a beginning balance of $8,790. Overhead costs are applied by using a rate of 70% of direct labor costs. Both jobs are unfinished on July 31. Data on July costs for both jobs are as follows:

	Job 391	Job 392
Direct materials	$5,100	$ 9,200
Direct labor cost	2,700	11,000

What is the total of the work-in-process account at July 31?

a.	$28,000
b.	$58,490
c.	$68,080
d.	$37,590
e.	none of these

ANS: C

	Job 391	Job 392
BWIP	$21,700	$ 8,790
DM	5,100	9,200
DL	2,700	11,000
OH	1,890	7,700
Total	$31,390	$36,690

$31,390 + $36,690 = $68,080

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Ending Work-in-Process for Lee’s Carpentry was $64,000 for January. Direct labor and direct materials together for the month were $39,000. Direct labor was twice as much as direct materials. The overhead rate is 70% of direct labor. No jobs were finished during the month. What was beginning Work-in-Process?

a.	$6,800
b.	$25,000
c.	$4,250
d.	$15,250
e.	$0

ANS: A

DM	$13,000
DL	26,000
OH	18,200
	$57,200

$64,000 – $57,200 = 6,800

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Wright’s Construction builds custom houses for individual buyers. On June 1, it had one job started with a beginning Work-in-Process of $56,000. During June the job was finished and sold. Direct labor for the job in June was $75,000 and direct materials used were $57,000. Overhead is computed at a rate of 65% of direct labor. There is a markup of 35% on all sales. What was the selling price of the house?

a.	$319,612.50
b.	$236,750
c.	$82,862.5
d.	$272,600
e.	262,087.5

ANS: A

BWIP	$ 56,000
DM	57,000
DL	75,000
OH	48,750
Total Cost	$236,750

$236,750 ´ 135% = $319,612.50

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Wright Corporation had the following information available for December of the current year:

Work in Process, December 1	$20,000
Materials placed into production, December	27,500
Direct labor, December	37,500

Plantwide overhead rate is 150% of direct labor costs. Job cost sheets had the following balances:

Job Z1	$32,500
Job Z2	55,000
Job Z3	35,000
Job Z4	18,750

Jobs Z3 and Z4 were not completed at the end of December. What is the balance in work-in process for Wright at the end of December?

a.	$85,000
b.	$87,500
c.	$56,250
d.	$53,750

ANS: D

SUPPORTING CALCULATIONS:

$35,000 + $18,750 = $53,750

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Figure 5-4.

Hill Company uses job-order costing. At the end of the month, the following data was gathered:

Job #	Total Cost	Complete?	Sold?
803	$611	yes	yes
804	$423	yes	no
805	$805	no	no
806	$682	yes	yes
807	$525	yes	no
808	$250	no	no
809	$440	yes	yes
810	$773	yes	no
811	$267	no	no
812	$341	no	no

Hill’s selling price is cost plus 50% for each of its products.

Refer to Figure 5-4. What is the total in the work-in-process account?

a.	$1,980
b.	$2,510
c.	$1,663
d.	$1,840
e.	$1,163

ANS: C

Job #	Total Cost
805	$805
808	$250
811	$267
812	$341
Total WIP	$1,663

PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-4. What is the total in Finished Goods?

a.	$1,721
b.	$2,230
c.	$1,700
d.	$1,860
e.	$2,163

ANS: A

Job #	Total Cost
804	$423
807	$525
810	$773
Total finished goods	$1,721

PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-4. What is Cost of Goods Sold for the month?

a.	$1,760
b.	$1,181
c.	$1,733
d.	$1,353
e.	$2,440

ANS: C

Job #	Total Cost
803	$611
806	$682
809	$440
Total Cost of Goods Sold	$1,733

PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-4. What is the selling price of Job 806?

a.	$682
b.	$1,320
c.	$1,440
d.	$920
e.	$1,023

ANS: E

Selling price = $682 ´ 1.50 = $1,023

PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Figure 5-5.

Brillant Design Company makes custom chairs for individual customers. On October 1, there was one job in process, Job 243, with a cost of $1,300. Jobs 244, 245, and 246 were started during the month of October. Data on costs added during the month are as follows:

	Job 243	Job 244	Job 245	Job 246
Direct Materials	$8,400	$2,300	$5,550	$9,200
Direct Labor	$3,100	$980	$2,200	$5,010

Overhead is applied to production at the rate of 70% of direct labor cost. Job 245 was completed on October 14 and the client was billed at cost plus 55%. All other jobs remained in process.

Refer to Figure 5-5. Calculate the balance in Work-in-Process on October 31.

a.	$17,717
b.	$22,875
c.	$36,653
d.	$32,820
e.	$15,820

ANS: C

	Job 243	Job 244	Job 246	Total
BWIP	$1,300
DM	$8,400	$2,300	$9,200
DL	$3,100	$980	$5,010
OH	$2,170	$686	$3,507
Total	$14,970	$3,966	$17,717	$36,653

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-5. What is the price of Job 245?

a.	$20,204.20
b.	$10,627.70
c.	$22,310.50
d.	$18,761.20
e.	$14,399.50

ANS: E

	Job 245
DM	$5,550
DL	$2,200
OH	$1,540
total cost	$9,290
price	$14,399.50

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-5. If selling and administrative expense for the month of October equaled $ 2,000, what is operating income for the month of October?

a.	$14,399.50
b.	$3,109.50
c.	$5,109.50
d.	$2,000.00

ANS: B

Only Job 245 was completed and sold during the month.

Price	$14,399.50
cost	($9,290)
profit	$5,109.50
Selling & admin exp.	($2,000)
Operating income	$3,109.50

PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Figure 5-6.

Stutz, Inc. designs and builds basketball gymnasiums. Each gymnasium is custom-built to individual customers’ specifications. Stutz uses job-order costing to keep track of its costs. In February it worked on three jobs. Data for these jobs are as follows:

	Job 175	Job 178	Job 179
Balance 2/1	$13,790	$ 0	$ 0
Direct Materials	16,200	8,500	30,500
Direct Labor Cost	23,300	7,600	45,000
Machine Hours	400	300	2,000

Overhead is applied to jobs at the rate of $25 per machine hour. By February 28, Job 178 is the only one unfinished. The balance of Finished Goods on February 1 is $94,000 (consisting of Job 177). Jobs 177 and 179 are sold during February. Stutz sells its product at cost plus 40%.

Refer to Figure 5-6. Calculate the balance in Work-in-Process on February 28.

a.	$23,600
b.	$16,100
c.	$212,390
d.	$0

ANS: A

Job 178 is the only job in Work-in-Process.

DM	$ 8,500
DL	$ 7,600
OH	$ 7,500 ($25 ´ 300)
	$23,600

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-6. Calculate the balance of Finished Goods at February 28.

a.	$63,290
b.	$39,500
c.	$53,290
d.	$63,690
e.	$0

ANS: A

Job 175 is the only one in Finished Goods

$13,790 + $16,200 + $23,300 + $10,000 (OH = $25 ´ 400) = $63,290

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-6. What is Cost of Goods Sold for February?

a.	$125,500
b.	$219,500
c.	$307,300
d.	$175,700
e.	$310,100

ANS: B

Cost of Goods Sold consists of Jobs 177 and 179.

Job 179 = $30,500 + $45,000 + $50,000 = $125,500

$125,500 + $94,000 = $219,500 total cost of both jobs

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-6. What is sales revenue for February?

a.	$219,500
b.	$175,700
c.	$131,600
d.	$307,300
e.	$237,300

ANS: D

Cost of Goods Sold = ($30,500 + $45,000 + $50,000) + $94,000 = $219,500

Sales revenue = $219,500 ´ 140% = $307,300

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Figure 5-7.

Laudermilk produces dairy equipment. Most of its jobs have a number of units per job. The company has two different departments through which all jobs pass. Overhead is applied using a plantwide rate of $13 per direct labor hour. Direct labor wages average $8 an hour. Data for Job #3 for the year is:

Direct materials		$40,000
Direct labor costs
	Dept. A	60,000
	Dept. B	12,000
Machine hours used
	Dept. A	200
	Dept. B	2,400
Units produced		20,000

Refer to Figure 5-7. Compute the total cost of Job #3.

a.	$229,000
b.	$112,000
c.	$134,600
d.	$145,800
e.	$231,600

ANS: A

DM	$ 40,000
DL	72,000
OH	117,000 ((72,000/$8) = 9,000 direct labor hours ´ $13 per hour)
Total	$229,000

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-7. Compute the cost per unit.

a.	$11.58
b.	$5.60
c.	$5.73
d.	$11.45
e.	none of these

ANS: D

DM	$ 40,000
DL	72,000
OH	117,000 (9,000 direct labor hours ´ $13 per hour)
Total	$229,000

$229,000/20,000 units = $11.45

PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Figure 5-8.

John’s Water Slides makes custom water slides for hotels. On September 1, there were three jobs in process, Jobs 812, 813, and 814. Two more jobs were started during September, Jobs 815 and 816. By September 30, Jobs 812, 814, and 816 were finished. The following data has been collected:

	Job 812	Job 813	Job 814	Job 815	Job 816
9/1 Balance	$615	$830	$ 945	—	—
Direct materials	750	235	1,280	$200	$915
Direct labor	420	115	560	320	875

Overhead is applied at the rate of 120% of direct labor cost. Jobs are sold at cost plus 60%. Selling and administrative expenses for September totaled $2,950. By September 30, Jobs 812 were 816 are sold, but the customer who ordered Job 814 decided he did not want the slide so it is still in the warehouse.

Refer to Figure 5-8. Calculate the ending balance in Work-in-Process as of September 30.

a.	$2,222
b.	$1,700
c.	$1,961
d.	$3,555.20
e.	$1,392

ANS: A

Jobs 813 and 815 are the only jobs left in process.

	Job 813	Job 815
BWIP	$ 830	$ 0
Direct materials	235	200
Direct labor	115	320
Overhead	138	384
Total	$1,318	$904

$1,318 + $904 = $2,222

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-8. What is the ending balance of Finished Goods if the beginning balance was $0?

a.	$3,457
b.	$5,531.20
c.	$8,206.40
d.	$13,737.60
e.	$2,785

ANS: A

Job 814 is the only one in Finished Goods

Total cost = $945 + $1,280 + $560 + $672 = $3,457

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-8. What is the selling price of Job 816?

a.	$4,544
b.	$2,840
c.	$2,864
d.	$3,408
e.	$0, it is not completed yet.

ANS: A

Total cost of Job 816 is $2,840.

$2,840 ´ 160% = $4,544.

PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-8. What is the cost of goods sold for September?

a.	$5,129
b.	$8,206.40
c.	$5,720
d.	$3,575
e.	$8,586

ANS: A

Jobs 812 and 816 are the only jobs that have been sold.

	Job 812	Job 816
BWIP	$ 615	$ 0
DM	750	915
DL	420	875
OH	504	1,050
Total	$2,289	$2,840

$2,289 + $2,840 = 5,129

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-8. What is John’s operating income for the month of September?

a.	$127.40
b.	$8,206.40
c.	$3,077.40
d.	$0
e.	none of these

ANS: A

Sales		$ 8,206.40
Less: Cost of goods sold		5,129.00
	Gross margin	3,077.40
Less: Operating expenses		2,950.00
	Operating income	$ 127.40

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Figure 5-9.

Warwick Company has the following transactions for the month of September:

Purchased materials on account for $220,384.

Materials requisitioned for $91,562.

Direct labor for the month was incurred (but not yet paid) of $69,000

Actual overhead for the month was $41,000. It has not been paid yet (Charge to various payables)

Overhead is applied to production at the rate of 65% of direct labor.

Jobs totaling $42,500 were transferred from Work-in-Process to Finished Goods.

Jobs costing $23,000 were sold.

Balances at the beginning of the month were:

Materials	22,760
Work-in-Process	0
Finished Goods	10,040

Refer to Figure 5-9. Calculate the Ending Balance of Raw Materials.

a.	$220,384
b.	$151,582
c.	$185,320
d.	$22,760
e.	91,562

ANS: B

Ending raw materials = $220,384 + $22,760 – $91,562 = $151,582

PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-9. What is the ending balance in Work-in-Process?

a.	$162,912
b.	$113,083
c.	$166,414
d.	$123,870
e.	$0

ANS: A

Ending WIP = $69,000 + $91,562 + $44,850 (as 69,000 x 65%) – $42,500 = $162,912

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-9. What is the correct journal entry to record actual overhead for the month?

a.	Overhead Control 41,000 Various Payables 41,000
b.	Work-in-Process 41,000 Various Payables 41,000
c.	Various Payables 41,000 Work-in-Process 41,000
d.	Various Payable 41,000 Overhead Control 41,000
e.	none of these are correct

ANS: A PTS: 1 DIF: Moderate OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-9. What is the journal entry to record applied overhead for the month?

a.	Work-in-Process 44,850 Overhead Control 44,850
b.	Various Payables 44,850 Overhead Control 44,850
c.	Overhead Control 44,850 Work-in-Process 44,850
d.	Overhead Control 44,850 Various Payables 44,850

ANS: A PTS: 1 DIF: Moderate OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-9. What is the ending balance of Finished Goods?

a.	$23,321
b.	$29,540
c.	$64,321
d.	$0
e.	$10,040

ANS: B

Ending Balance = $10,040 + $42,500 – 23,000 = $29,540

PTS: 1 DIF: Easy OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Figure 5-10.

The King Corporation manufactures custom-made furniture. The following data pertains to Job X4A:

Direct materials placed into production	$9,000
Direct labor hours worked	300 hours
Direct labor rate per hour	$ 15
Machine hours worked	100 hours

Plantwide overhead rate is $22.50 per machine hour.

Refer to Figure 5-10. One-half of Job X4A was sold for $10,000. What is the total amount of costs assigned to Job X4A?

a.	$9,000
b.	$20,250
c.	$13,500
d.	$15,750

ANS: D

SUPPORTING CALCULATIONS:

$9,000 + $15(300) + $22.50(100) = $15,750

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-10. Job X4A consists of 500 units. One-half of Job X4A was sold for $10,000. What is the cost per unit for Job X4A?

a.	$18
b.	$31.50
c.	$27
d.	$40.50

ANS: B

SUPPORTING CALCULATIONS:

$9,000 + $15(300) + $22.50(100) = $15,750/500 = $31.50

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

When the work-in-process account is debited for direct labor, what account is usually credited?

a.	Cost of Goods Sold
b.	Sales Revenue
c.	Wages Payable
d.	Overhead Control
e.	Accounts Receivable

ANS: C PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

When overhead is debited to Overhead Control, what is the credit?

a.	Various payable accounts
b.	Cost of Goods Sold
c.	Work in Process
d.	Finished Goods
e.	Accounts Receivable

ANS: A PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

Which of the following accounts is debited when goods are sold?

a.	Finished Goods
b.	Overhead Control
c.	Raw Materials
d.	Cost of Goods Sold
e.	Sales Revenue

ANS: D PTS: 1 DIF: Moderate OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

What account is credited when goods are sold?

a.	Accounts receivable
b.	Cost of Goods Sold
c.	Finished Goods
d.	Raw materials
e.	Work-in-process

ANS: C PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

What type of event would cause two separate journal entries to be made?

a.	Transferring the good to Finished Goods
b.	Applied overhead to production based on direct labor hours
c.	Transferring the goods from Raw Materials to Work-in-Process
d.	Closing overapplied overhead to Cost of Goods Sold
e.	Selling the good

ANS: E PTS: 1 DIF: Moderate OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

When purchasing raw materials on account, what type of accounts would increase?

a.	Assets and equity
b.	Liabilities and expenses
c.	Liabilities and revenues
d.	Assets and liabilities
e.	Assets and expenses

ANS: D PTS: 1 DIF: Moderate OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

When a job costing $5,000 is completed, the following journal entry is made:

a.	Finished Goods 5,000 Cost of Goods Sold 5,000
b.	Cost of Goods Sold 5,000 Finished Goods 5,000
c.	Work-in-Process 5,000 Finished Goods 5,000
d.	Finished Goods 5,000 Work-in-Process 5,000
e.	Cost of Goods Sold 5,000 Sales 5,000

ANS: D PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

On April 9 of the current year, Job XX4 was completed. The job cost sheet showed a total of $4,000 in direct materials and $6,000 in direct labor at a rate of $20 per direct labor hour. Plantwide overhead is applied at $30 per direct labor hour. The debit to Finished Goods Inventory to record the completion of Job XX4 is

a.	$13,000.
b.	$9,000.
c.	$4,000.
d.	$19,000.

ANS: D

SUPPORTING CALCULATIONS:

$4,000 + $6,000 + $30($6,000/$20) = $19,000

PTS: 1 DIF: Moderate OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

At the beginning of the year, Fluman Corporation estimates overhead will be $150,000. If the actual overhead for the year is $152,000 and the applied overhead for the year is $143,000, what is the journal entry needed to reconcile the overhead variance? Assume that the overhead variance is immaterial.

a.	Cost of Goods Sold 9,000 Overhead Control 9,000
b.	Overhead Control 9,000 Cost of Goods Sold 9,000
c.	Cost of Goods Sold 7,000 Overhead Control 7,000
d.	Overhead Control 7,000 Cost of Goods Sold 7,000
e.	none of these

ANS: A

Actual Overhead	$ 152,000
Applied Overhead	– 143,000
Underapplied overhead	$ 9,000

PTS: 1 DIF: Moderate OBJ: 5-2 | 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

Figure 5-11.

Olson Corporation constructs new homes. Assume that Olson uses a job costing system. During May of the current year, the following transactions occurred:

Olson purchased $4,500 of lumber on account.

Olson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.

Depreciation of $1,500 on equipment used to build new houses was recorded.

A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.

Refer to Figure 5-11. The journal entry to record the requisition of lumber for Olson would include a

a.	debit to Work-in-Process of $4,500.
b.	debit to Materials Inventory of $3,750.
c.	credit to Finished Goods of $3,750.
d.	debit to Work-in-Process of $3,750.

ANS: D PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-11. The journal entry to record labor for Olson would include a

a.	debit to Finished Goods of $750.
b.	debit to Wages Payable of $750.
c.	credit to Finished Goods of $750.
d.	debit to Work-in-Process of $750.

ANS: D

SUPPORTING CALCULATIONS:

Labor is recorded as a debit to Work-in-Process $15 ´ 50 = $750

PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

Figure 5-12.

Walter Company uses a job-order costing system to account for product costs. The following information pertains to the current year:

Materials placed into production	$140,000
Indirect labor	40,000
Direct labor (10,000 hours)	160,000
Depreciation of factory building	60,000
Other plantwide overhead	100,000
Increase in work-in-process inventory	30,000

Plantwide overhead rate is $18 per direct labor hour.

Refer to Figure 5-12. What is the total amount credited to Materials Inventory for Walter in the current year?

a.	$480,000
b.	$170,000
c.	$140,000
d.	$110,000

ANS: C

SUPPORTING CALCULATIONS:

Materials used in production = $140,000

PTS: 1 DIF: Moderate OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-12. What is the total amount debited to Finished Goods Inventory in the current year?

a.	$490,000
b.	$510,000
c.	$450,000
d.	$550,000

ANS: C

SUPPORTING CALCULATIONS:

$140,000 + $160,000 + ($18 ´ 10,000) – $30,000 = $450,000

PTS: 1 DIF: Moderate OBJ: 5-4 | 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

PROBLEM

McElligott Doll Company had the following overhead costs and production for two months. The dolls are identical to each other.

	September	January
Actual overhead	$12,000	$12,000
Number of dolls	3,000	2,000

A.	What is the overhead cost per doll per month?
B.	What type of costing is McElligott using? What is the main issue with using this type of costing?

ANS:

A.	For September the unit overhead cost per doll is $4 (12,000/3,000). For January the unit overhead cost per doll is $6 (12,000/2,000).

B.	The type of costing being used here is Actual Costing. The problem with assigning actual overhead to units is that the number of units produced per month varies. This makes the costs of the dolls different because of the different number of units produced. The doll produced in January will be more expensive because of this.

PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Williams Incorporated estimated overhead to be $440,000 and direct labor hours to be 100,000 for the year. Actual direct labor ended up being 120,000 hours. Actual overhead for the year amounted to $500,000.

A.	What is the predetermined overhead rate?
B.	What is the applied overhead for the year?
C.	What is the amount of under- or over-applied overhead at the end of the year?

ANS:

A.	predetermined overhead rate = $440,000/100,000 = $4.40 per direct labor hour
B.	applied overhead = $4.40 ´ 120,000 = $528,000
C.	$528,000 – $500,000 = $28,000 over-applied overhead

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

At the beginning of the year Grey Corporation estimated the following:

	Assembly Department	Packaging Department
Overhead	$ 840,000	$ 210,000
Direct labor hours	80,000	4,000
Machine hours	20,000	12,000

Grey uses departmental overhead rates. In the assembly department , overhead is applied on direct labor hours. In the packaging department, overhead is applied on the basis of machine hours. Actual data for the month of April are as follows:

	Assembly Department	Packaging Department
Overhead	$ 42,759	$ 20,400
Direct labor hours	4,000	300
Machine hours	1,000	1,200

Required:

A.) Calculate the predetermined overhead rate for the assembly and packaging departments.

B.) Calculate the overhead applied to production in each department for the month of April.

C.) Calculate how much each department’s overhead is overapplied/underapplied.

ANS:

A.)

Assembly department overhead:

$840,000/80,000 = $10.50

Packaging department overhead:

$210,000/12,000 = $17.50

B.) Assembly department:

$10.50 x 4,000 = $42,000

Packaging department:

$17.50 x 1,200 = $21,000

C.)Assembly department:

$42,759 – 42,000 = $759 underapplied

Packaging department:

$20,400 – 21,000 = $600 overapplied

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

A company has two departments that all goods pass through, machining and assembly. Machining overhead is applied based on machine hours and assembly overhead is applied based on direct labor hours. Data on each department is as follows:

	Machining	Assembly
Budgeted overhead	$75,000	$40,000
Budgeted direct labor hours	5,000	10,000
Budgeted machine hours	25,000	1,000
Actual overhead	$75,400	$39,200
Actual direct labor hours	5,203	9,980
Actual machine hours	25,040	850

A.	Calculate the overhead rate for each department.
B.	What is each department’s applied overhead?
C.	Calculate each department’s overhead variance. Specify whether it is overapplied or underapplied.

ANS:

A.	Machining OH rate = $75,000/25,000 = $3 per machine hour
	Assembly OH rate = $40,000/10,000 = $4 per direct labor hour

B.	Machining applied OH = $3 ´ 25,040 = $75,120
	Assembly applied OH = $4 ´ 9,980 = $39,920

C.	Machining OH variance = $75,400 – $75,120 = $280 underapplied
	Assembly OH variance = $39,920 – $39,200 = $720 overapplied

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Elf Company produces ornamental trees and uses normal costing. Elf applies overhead based on direct labor hours. The following data are provided:

	Budgeted	Actual
Overhead	$400,000	$392,000
Machine hours	20,000	18,000
Direct labor hours	16,000	17,840
Direct materials cost		$521,000
Direct labor cost		$410,000
Units produced		10,000

A.	Calculate applied overhead.
B.	Calculate the unit cost.

ANS:

A.	Predetermined OH rate = $400,000/16,000 = $25 per direct labor hour
	$25 ´ 17,840 = $446,000 applied overhead

B.	Unit cost = ($521,000 + $410,000 + $446,000)/10,000 = $137.70 per ornamental tree

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Pribil Farm Equipment is a job-order costing manufacturer that uses a plantwide overhead rate based on direct labor hours. Estimations for the year include $420,000 in overhead and 30,000 direct labor hours. Pribil worked on five jobs in March. Data are as follows:

	Job 89	Job 90	Job 91	Job 92	Job 93
Balance, 3/1	$23,110	$18,240	$ 9,510	$ 0	$ 0
Direct materials	13,000	17,210	22,900	15,240	8,210
Direct labor cost	$8,075	$11,500	$16,250	$9,750	$4,860
Direct labor hours	1,615	2,300	3,250	1,950	972

By March 31, Jobs 89 and 91 were completed and sold. The rest of the jobs remained in process.

A.	Calculate the plantwide overhead rate.
B.	Calculate the Work in Process on March 31.
C.	Calculate the cost of goods sold for March.
D.	Assume Pribil marks up cost by 40%. What is the selling price of Jobs 89 and 91?

ANS:

A.	$420,000/30,000 = $14 per direct labor hour

B.	$79,150 + $52,290 + $26,678 = $158,118

		Job 90	Job 92	Job 93
	Balance, 3/1	$18,240	$0	$0
	Direct materials	17,210	15,240	8,210
	Direct labor cost	11,500	9,750	4,860
	Overhead	32,200	27,300	13,608
	Total	$79,150	$52,290	$26,678

C.	Job 89: ($23,110 + $13,000 + $8,075) + (1,615 ´ $14) = $66,795
	Job 91: ($9,510 + $22,900 + $16,250) + (3,250 ´ $14) = $94,160

D.	Job 89: $66,795 ´ 1.4 = $93,513
	Job 91: $94,160 ´ 1.4 = $131,824

PTS: 1 DIF: Challenging OBJ: 5-2 | 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Fowler Company is a job-order costing company that produces customized bicycles. During the month of October, Fowler had three jobs in process, Jobs 3, 4, & 5. By the end of the month all three jobs had been completed, with Job 3 being sold for $435. The following costs belong to each job:

	Job 3	Job 4	Job 5
Direct materials	$ 80	$ 75	$ 85
Direct labor	100	110	95
Applied overhead	120	132	114
Total	$300	$317	$294

A.	Overhead is applied based on direct labor dollars. What is the overhead rate?
B.	What rate does Fowler use to price its jobs?
C.	What is the gross margin on Job 3?

ANS:

A.	$120/$100 = 1.20 = 120% of direct labor cost (This was using Jobs 3, Job 4 & 5 result in the same answer.)

B.	$435/$300 = 1.45 Fowler prices its jobs at cost plus 45%.

C.	$435 – $300 = $135

PTS: 1 DIF: Moderate OBJ: 5-2 | 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Feline Company uses a normal job-order costing system. Currently, a plantwide overhead rate based on direct labor is used. Lola Katz, the plant manager, has heard that departmental overhead rates can offer significantly better cost assignments than a plantwide rate can offer. Some jobs spend most of their time in Department A, while others spend most of their time in Department B. Feline has the following data for its two departments for the coming year:

	Department A	Department B
Expected overhead cost	$75,000	$33,000
Expected direct labor hours	30,000	24,000

A.	Compute the plantwide overhead rate.
B.	Compute the departmental overhead rates. (Carry out your answers to 3 decimal places.)
C.	Which overhead rate would you recommend and why?

ANS:

A.	$108,000/54,000 = $2 per direct labor hour

B.	Dept. A = $75,000/30,000 = $2.50 per direct labor hour
	Dept. B = $33,000/24,000 = $1.375 per direct labor hour

C.	The departmental rate would provide more accuracy. Department A appears to be more overhead intensive, so jobs spending more time in Department A ought to receive more overhead.

PTS: 1 DIF: Challenging OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

What are the three steps of overhead application?

ANS:

1.	Calculate the predetermined overhead rate.
2.	Apply overhead to production throughout the year.
3.	Reconcile the difference between the total actual overhead incurred during the year and the total overhead applied to production.

PTS: 1 DIF: Easy OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Jocarro Company has a job costing system. The following items appeared in the Work-in-Process account during February of the current year:

February 1 balance	$ 20,000
Materials placed into production	?
Direct labor (4,000 hours)	$120,000
Plantwide overhead applied	$ 96,000
Cost of goods manufactured	$400,000
February 28 balance	$ 16,000

Jocarro applies overhead to production on the basis of direct labor hours. Job XX, the only job in process on February 28, has been charged $10,600 materials cost and has 100 labor hours of direct labor time assigned to it.

Required:

A.	Determine the predetermined plantwide overhead rate for Jocarro Company.
B.	Determine the amounts of materials, direct labor, and plantwide overhead included in the February 28 work in process.
C.	Determine the amount of materials placed into production during February.

ANS:

A.	Plantwide overhead rate = $96,000/4,000 = $24 per direct labor hour

B.	Costs assigned to Job XX:
		Materials	$10,600
		Direct labor (100 ´ $30*)	3,000
		Plantwide overhead applied (100 ´ $24)	2,400
		Work in process, February 28	$16,000

		* $120,000/4,000 = $30 per hour

C.	$X + $120,000 + $96,000 + $20,000 – $16,000 = $400,000
	X = $180,000

PTS: 1 DIF: Moderate OBJ: 5-2 | 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Reed Incorporated uses a job-order costing system and a predetermined overhead rate based on machine hours.

At the beginning of the year, the company estimated manufacturing overhead for the year would be $240,000 and machine hours would be 8,000.

The following information pertains to December of the current year:

	Job 10	Job 11	Job 12	Total
Work-in-process, Dec. 1	$16,000	$26,000	$38,000	$80,000

December production activity:

Materials requisitioned	$ 4,000	$ 4,800	$ 7,200	$16,000
Direct labor cost	$ 2,400	$ 3,600	$ 4,000	$10,000
Machine hours	400	700	900	2,000
Labor hours	120	180	200	500

Actual manufacturing overhead cost incurred in December was $61,000.

Required:

A.	Compute the predetermined overhead application rate.
B.	Determine the total cost associated with each job.
C.	If Jobs 10 and 12 were completed, prepare the journal entry to move the cost.
D.	If Job 10 was delivered to customers that paid $50,000 cash, prepare the journal entries.
E.	What is the gross margin for Job 10?
F.	What is the cost assigned to ending work in process?
G.	Assuming no beginning finished goods what is the cost assigned to ending finished goods?
H.	How much was overhead over/underapplied?

ANS:

A.	$240,000/8,000 = $30

B.			Job 10	Job 11	Job 12	Total
	Work in process, Dec. 1		$16,000	$26,000	$38,000	$80,000
	Materials requisitioned		$ 4,000	$ 4,800	$ 7,200	$16,000
	Direct labor cost		$ 2,400	$ 3,600	$ 4,000	$10,000
	Overhead applied:
	Machine hours
		400 ´ $30	$12,000
		700 ´ $30		$21,000
		900 ´ $30	_______	______	$27,000
		Total	$34,400	$55,400	$76,200


C.	Job 10 + Job 12 = $34,400 + $76,200 = $110,600
	(the cost of goods manufactured)

	Finished goods			$110,600
		Work in process			$110,600

D.	Record a sale

	Accounts Receivable			$50,000
		Sales			$50,000

	Cost of goods sold			$34,400
		Finished goods			$34,400

E.	Sales		$50,000
	Cost of goods sold		34,400
	Gross margin		$15,600

F.	Job 11 is still in production = $55,400

G.	Finished goods has one job – Job 12 = $76,200

H.	Actual overhead		$61,000
	Applied overhead		($12,000 + $21,000 + $27,000) = $60,000
	Underapplied overhead		$ 1,000

PTS: 1 DIF: Moderate OBJ: 5-2 | 5-4 | 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Ski Company produces various types of snow skis. Estimated overhead for the year was $720,000 and estimated direct labor hours were 240,000. During the month of June, 17,400 direct labor hours were worked, $50,400 of direct materials were used and the average wage was $12 per hour. In June, 15,000 pairs of skis were produced.

A.	Calculate the predetermined overhead rate.
B.	Calculate the overhead applied to production for June.
C.	Calculate the unit cost for each pair of skis.

ANS:

A.	$720,000/240,000 = $3 per direct labor hour

B.	$3 ´ 17,400 = $52,200


C.	$311,400/15,000 = $20.76 per pair of skis

		DM	$ 50,400
		DL	208,800
		OH	52,200
		Total	$311,400

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Wisteria Company provided the following data:

Budgeted overhead	$80,000
Budgeted direct labor hours	10,000
Actual overhead	$86,000
Actual direct labor hours	10,860

A.	What is applied overhead?
B.	What is the overhead variance? Is it overapplied or underapplied?

ANS:

predetermined overhead rate = $80,000/10,000 = $8 per direct labor hour

A.	$8 ´ 10,860 = $86,880.

B.	$86,880 – $86,000 = $880 overapplied

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Budgeted overhead is $60,000, budgeted direct labor hours are 3,000, actual overhead is $64,000, and direct labor hours are 3,230. Unadjusted cost of goods sold is $135,670.

A.	Calculate the overhead variance.
B.	What is adjusted cost of goods sold?

ANS:

Predetermined overhead rate = $60,000/3,000 = $20 per direct labor hour.

Applied overhead = $20 ´ 3,230 = $64,600

A.	$64,600 – $64,000 = $600 overapplied

B.	$135,670 – $600 = $135,070

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Figure 5-13.

During February, Alexander, Inc., worked on two jobs with the following data:

	Job 12	Job 13
Units in each order	100	200
Units sold	100	—-
Materials requisitioned	$ 2,480	$ 1,970
Direct labor hours	820	1,166
Direct labor cost	$12,300	$17,490

Overhead is assigned on the basis of direct labor hours at a rate of $12. During February, Job 12 was completed and transferred to finished goods. Job 13 is the only unfinished job at the end of the month.

Refer to Figure 5-13.

A.	Calculate the per-unit cost of Job 12.
B.	Calculate the ending balance in the work-in-process account.

ANS:

A.	Unit cost = ($ 2,480 + $12,300 + $9,840)/100 = $246.20 per unit

B.	Ending WIP = Job 13 = $1,970 + $17,490 + $13,992 = $33,452

PTS: 1 DIF: Moderate OBJ: 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-13.

A.	Prepare the journal entries for requisitioning all materials used during the month.
B.	Prepare the journal entries for direct labor for the month. Assume the workers have not been paid yet.

ANS:

A.	Work in Process		$4,450
		Raw Materials		$4,450

B.	Work in Process		$29,790
		Wages Payable		$29,790

PTS: 1 DIF: Easy OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-13. Prepare the journal entries reflecting the completion and sale on account of Job 12. The selling price is 160% of cost.

ANS:

Finished Goods		$24,620
	Work in Process		$24,620

Cost of Goods Sold		$24,620
	Finished Goods		$24,620

Accounts Receivable		$39,392
	Sales		$39,392

PTS: 1 DIF: Moderate OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

If actual overhead for the year is $33,451 and applied overhead is $32,000, is the overhead variance overapplied or underapplied? Prepare the journal entry necessary to reconcile overhead. Assume the variance is immaterial.

ANS:

Actual overhead is more than applied overhead so the overhead variance of $1,451 is underapplied. The journal entry would be:

Cost of Goods Sold		$1,451
	Overhead Control		$1,451

PTS: 1 DIF: Moderate OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

The following information was taken from the job cost sheet for Job 101 for Scott Manufacturing Company:

Date started:	July 5
Date completed:	August 21

	Direct	Direct	Factory	Job
Date	materials	labor	overhead	Total
July 5	$3,000
July 15		$ 900	$450
July 17	1,500
July 22		1,350	675
August 1	1,500
August 21		600	300

Job 101 was sold on account on August 25 for 160% of its cost.

Required:

A.	Prepare the journal entries to record the costs incurred for Job 101 in the current year for direct materials, direct labor, and factory overhead.
B.	Prepare the journal entry to record the completion of Job 101.
C.	What is the predetermined factory overhead rate for Scott?
D.	Prepare the journal entries to record the sale of Job 101.

ANS:

A.	Work in Process		6,000
		Raw Materials		6,000

	Work in Process		2,850
		Wages Payable		2,850

	Work in Process		1,425
		Overhead Control		1,425

B.	Finished Goods		10,275
		Work in Process		10,275

C.	$1,425/$2,850 = 50% of direct labor costs

D.	Accounts Receivable		16,440
		Sales		16,440

	Cost of Goods Sold		10,275
		Finished Goods		10,275

PTS: 1 DIF: Moderate OBJ: 5-2 | 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

Brady Corporation has estimated overhead to be $250,000 for the year based on an estimated amount of direct labor hours of 40,000. Actual direct labor hours for the year are 41,500 and actual overhead is $258,900.

Required:

A.) Calculate the predetermined overhead rate.

B.) Calculate how much overhead has been applied.

C.) Calculate the overhead variance.

D.) Assuming that the variance is immaterial, prepare the journal entry to close the variance.

ANS:

A.) Overhead rate = $250,000/40,000 = $6.25

B.) $6.25 x 41,500 direct labor hours = $259,375

C.) $259,375 – $258,900 = 475 overapplied

D.)

Overhead Control	$475
Cost of Goods Sold		$475

PTS: 1 DIF: Moderate OBJ: 5-2 | 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Figure 5-14

Deluxe Design Company makes custom furniture. On December 1, there were two jobs in process, Job 683, with a cost of $14,200 and Job 684 with a cost of $23,500. Jobs 685, 686, and 687 were started during the month of December. Data on costs added during the month are as follows:

	Job #683	Job #684	Job #685	Job #686	Job #687
Direct materials	$11,000	$8,000	$31,400	$16,700	$6,000
Direct labor	$21,000	$6,000	$12,300	$8,450	$2,500

Overhead is applied to production at the rate of 80% of direct labor cost. Job 685 was completed on December 17. Job 684 was completed on December 21 and the client was billed at cost plus 45%. All other jobs remained in process.

Refer to Figure 5-14.

Required:

A.) Determine the amount of overhead to apply to each job for the period.

B.) Calculate the cost of work-in-process at the end of the month.

C.) Calculate the cost of finished goods, assuming that finished goods inventory on December 1st was zero.

ANS:

A.)

	Job #683	Job #684	Job #685	Job #686	Job #687	Total
Direct labor	$21,000	$6,000	$12,300	$8,450	$2,500	$50,250
Overhead rate	80%	80%	80%	80%	80%	80%
Applied overhead	$16,800	$4,800	$9,840	$6,760	$2,000	$40,200

B.)

	Job #683	Job #686	Job #687	Total
BWIP	$14,200
Direct materials	$11,000	$16,700	$6,000
Direct labor	$21,000	$8,450	$2,500
Overhead	$16,800	$6,760	$2,000
Total	$63,000	$31,910	$10,500	$105,410

C.)

	Job #685
Direct materials	$31,400
Direct labor	$12,300
Overhead	$9,840
Total finished goods	$53,540

PTS: 1 DIF: Moderate OBJ: 5-2 | 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-14

Required:

A.) The actual overhead for December was $41,100, calculate the variance.

B.) Calculate the sales price for Job #684.

C.) Calculate the adjusted cost of goods sold for the month of December.

D.) If selling and administrative expenses for the month totaled $5,600, what is the company’s operating income for December?

ANS:

A.) $41,100 – 40,200 = $900 underapplied

	Job #683	Job #684	Job #685	Job #686	Job #687	Total
Direct labor	$21,000	$6,000	$12,300	$8,450	$2,500	$50,250
Overhead rate	80%	80%	80%	80%	80%	80%
Applied overhead	$16,800	$4,800	$9,840	$6,760	$2,000	$40,200

B.)

	Job #684
BWIP	$ 23,500
Direct materials	$8,000
Direct labor	$6,000
Overhead	$4,800
Total cost	$ 42,300
Sales mark-up	45%
Sales price	$ 61,335

C.)

	Job #684
BWIP	$ 23,500
Direct materials	$8,000
Direct labor	$6,000
Overhead	$4,800
	$ 42,300
Underapplied overhead	900
Total cost of goods sold	$43,200

D.)

Sales	$ 61,335
Cost of goods sold	$ 43,200
Gross profit	$ 18,135
Less: selling and admin. expense	$ 5,600
Operating income	$ 12,535

PTS: 1 DIF: Moderate OBJ: 5-2 | 5-4

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Refer to Figure 5-14.

Prepare the journal entries to record the following:

A.) Requisitioning of raw materials

B.) Direct labor costs

C.) Applied overhead

D.) Transfer to finished goods

E.) Sale of finished goods (assume sale was made on account)

F.) Closing underapplied/overapplied variance (all variances are immaterial)

ANS:

A	Work in Process	$73,100
	Raw Materials		$73,100

B	Work in Process	$50,250
	Wages Payable		$50,250

C	Work in Process	$40,200
	Overhead Control		$40,200

D	Finished Goods	$95,840
	Work in Process		$95,840

E	Cost of Goods Sold	$42,300
	Finished Goods		$42,300

E	Accounts Receivable	$61,335
	Sales		$61,335

F	Cost of Goods Sold	$900
	Overhead Control		$900

PTS: 1 DIF: Moderate OBJ: 5-5

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-06-Recording Transactions | ACBSP-APC-34-Job Order Costing

Bower Company manufactures a product in a factory that has two producing departments, Cutting and Stitching, and two support departments, D1 and D2. The activity driver for D1 is number of employees, and the activity driver for D2 is number of machine hours. The following data pertain to Bower:

	Support Departments		Producing Departments
	D1	D2	Cutting	Stitching
Direct costs	$210,000	$165,000	$130,000	$78,500
Normal activity:
Number of employees	–	40	80	170
Machine hours	800	–	15,000	5,000

Required:

Calculate the cost assignment ratios to be used under the direct method for departments D1 and D2.

Allocate the support department costs to the producing departments by using the direct method.

ANS:

Allocation ratios for D1 based on number of employees:

Cutting = 80/250 = 0.32

Stitching = 170/250 = 0.68

Allocation ratios for D2 based on number of machine hours:

Cutting = 15,000/20,000 = 0.75

Stitching = 5,000/20,000 = 0.25

	Support Departments		Producing Departments
	D1	D2	Cutting	Stitching
Direct costs $210,000		$165,000	$130,000	$78,500
Allocate
D1	(210,000.00)	–	67,200	142,800
D2	–	(165,000.00)	123,750	41,250
Total	$0	$0	$320,950	$262,550

PTS: 1 DIF: Moderate OBJ: 5-6

NAT: AACSB Analytic | AICPA FN-Measurement | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

ESSAY

There are two major types of companies: those that use a job-order costing system and those that use process-costing systems.

A.	Explain the differences between the two types of companies.
B.	List 3 examples of each type of company.

ANS:

A.	Manufacturing and service firms producing unique products or services require a job-order accounting system. The cost of one job differs from that of another job and must be kept separate. Firms producing very similar products or services can use a process-costing system. The cost of one unit is identical to the cost of another unit.

B.	Common job-order businesses include: printing, construction, furniture making, medical and dental services, automobile repair, and beautician services.
	Common process manufacturers include: food canning and manufacturing, cement, petroleum, and pharmaceutical and chemical firms.

PTS: 1 DIF: Moderate OBJ: 5-1

NAT: AACSB Communication | AICPA BB-Industry | IMA-Cost Management | ACBSP-APC-34-Job Order Costing | ACBSP-APC-35-Process Costing

Consider two costing systems, normal costing and actual costing.

A.	Which costing system do most firms use to assign costs to units of product or service? What does this costing system include?
B.	What is the other costing system? What does this costing system include?

ANS:

A.	Most firms use normal costing systems to assign costs to units of product or service. This system includes actual direct materials, actual direct labor, and applied overhead.

B.	The other costing system is the actual costing system. It includes actual direct materials, actual direct labor, and actual overhead.

PTS: 1 DIF: Moderate OBJ: 5-2

NAT: AACSB Communication | AICPA BB-Industry | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

You Decide

You are the senior cost accountant at Adventure Industries and you have been asked to explain to the new staff accountant how the company keeps track of job costs through source documents. Also you need to inform the staff accountant how these source documents are important in determining inventory, expense and revenue amounts at the end of the period.

ANS:

Since the company produces a wide variety of products that are distinct from each other, every time a new job is started a job-order cost sheet needs to be prepared. The job-order cost sheet lists the total cost of materials, labor and overhead for a single job. In order to track the cost of direct materials for each job a source document known as a materials requisition form is used. On this form the type, quantity and unit price of the direct materials issued is listed as well as the job order number. The source document used to track direct labor is a time ticket. On the time ticket the employee indicates the amount of time worked on a particular job as well as his or her wage rate. Other source documents may be needed if overhead is being applied based on an activity other than direct labor hours to ensure the proper amount of overhead is being applied to each job.

These source documents are the basis used by the company to determine their work-in-process and finished goods inventory balances. Work-in-process inventory will consist of all the job-order cost sheets for the unfinished jobs. Finished inventory will be comprised of all job-order cost sheets that have been completed but not yet sold. Job-order cost sheets are also used to determine the companies cost of goods sold when the company actually sells the products related to a particular job order. Many times company’s will set the price of a particular job to total cost plus a percentage above cost. Therefore job-order cost sheets are extremely important when determining the sales price for the job. If the costs were not accurately tracked then the company could be over charging or under charging the customer.

PTS: 1 DIF: Moderate OBJ: 5-3

NAT: AACSB Communication | AICPA BB-Industry | IMA-Cost Management | ACBSP-APC-34-Job Order Costing

Managerial Accounting The Cornerstone of Business Decisions International Edition 4th Edition by Maryanne M. Mowen - Test Bank

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Managerial Accounting The Cornerstone of Business Decisions International Edition 4th Edition by Maryanne M. Mowen - Test Bank

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