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Exam 5: Job-Order Costing

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Question 91

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Nature's Best Milk Nature's Best Milk 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 labour hour. Direct labour wages average $8 an hour. Data for Job 3 for the year are as follows: $\begin{array} { l r } \text { Direct Materials } & \$ 50,000 \\\text { Direct Labour Costs } & \\\text { Dept. A } & 60,000 \\\text { Dept. B } & 12,000 \\\text { Machine hours used } & \\\text { Dept A } & 200 \\\text { Dept. B } & 2,400 \\\text { Units Produced } & 20,000\end{array}$ -Refer to Nature's Best Milk. What is the cost per unit?

A) $5.60
B) $5.73
C) $11.95
D) $13.00

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Question 92

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Match each following cost flows with their corresponding job-costing event from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Actual overhead is reconciled with applied overhead

A) Completion of job
B) End of each accounting period
C) Materials are removed from storage into production
D) Product is sold
E) End of year

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Question 93

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How are unit costs calculated for process costing and job-order costing?

What is a characteristic of actual overhead using normal costing?

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

Match each following terms with their correct description from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Form headed by the job order number, or name

Nature's Best Milk Nature's Best Milk 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 labour hour. Direct labour wages average $8 an hour. Data for Job 3 for the year are as follows: $\begin{array} { l r } \text { Direct Materials } & \$ 50,000 \\\text { Direct Labour Costs } & \\\text { Dept. A } & 60,000 \\\text { Dept. B } & 12,000 \\\text { Machine hours used } & \\\text { Dept A } & 200 \\\text { Dept. B } & 2,400 \\\text { Units Produced } & 20,000\end{array}$ -Refer to Nature's Best Milk. What is the total cost of Job 3?

Peterson Company has applied overhead of $75,000 and actual overhead of $87,600 for the month of October. It applies overhead on the basis of direct labour hours, which equalled 15,000 in October. Overhead for the year was estimated to be $925,000. What are the direct labour hours estimated for the year?

What is a characteristic of normal costing?

Kilo Company has a job-costing system. The following items appeared in the Work-in-Process Inventory account during January of the current year: $\begin{array}{lr}\text { January } 1 \text { balance } & \$ 20,000 \\\text { Materials placed into production } & ? \\\text { Direct labour (4,000 hours) } & \$ 120,000 \\\text { Manufacturing ov erhead applied } & \$ 96,000 \\\text { Cost of goods manufactured } & \$ 400,000 \\\text { January 31 balance } & \$ 16,000\end{array}$ Kilo applies overhead to production on the basis of direct labour hours. Job XX, the only job in process on January 31, has been charged $10,600 materials cost and has 100 labour hours of direct labour time assigned to it. Required: A. Determine the predetermined manufacturing overhead rate for Kilo Company. B. Determine the amounts of materials, direct labour, and manufacturing overhead included in the January 31 Work-in-Process Inventory. C. Determine the amount of materials placed into production during January.

Shakers Manufacturing has the following information listed before reconciling the overhead variance. $\begin{array} { l r } \text { Estimated Overhead } & \$ 760,000 \\\text { Applied Overhead } & 756,000 \\\text { Actual Overhead } & 740,000 \\\text { Cost of Goods Sold } & 935,000\end{array}$ Assume that any overhead variance is insignificant. What is the adjusted Cost of Goods Sold after adjusting for the overhead variance?

Actual overhead costs are accumulated in the overhead control account.

The difference between actual overhead and applied overhead is the overhead variance.

Bob's Powerwasher Company Bob's Powerwasher Company makes custom powerwashers for individual customers. On April 1, one job was in process, Job 900, which had a cost of $45,650. Jobs 901, 902, and 903 were started during the month of July. Data on costs added during the month are as follows: $\begin{array}{lllll}&\text { Job } 900&\text { Job } 901&\text { Job } 902&\text { Job } 903\\\text { Direct Materials } & \overline{\$ 12,500} & \$ 6,740 & \$ 2,520 & \$ 7,870 \\\text { Direct Labour } & \$ 5,880 & \$ 10,280 & \$ 3,760 & \$ 11,360\end{array}$ Overhead is applied to production at the rate of 85% of direct labour cost. Job 903 was completed on April 26, and the client was billed at cost plus 45%. All other jobs remained in process. -Refer to Bob's Powerwasher Company. What is the sales price of Job 903?

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

What is characteristic of job-order costing?

Process costing is used for manufacturing and service firms producing unique products or services.

Steel 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 November of the current year: $\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Job 10\quad\quad Job 11\quad\quad Job 12 } \quad \text { Total }$ $\text { Work-in-Process Inventory, Nov. } 1 \quad \$ 16,000 \quad \$ 26,000 \quad \$ 38,000 \quad \$ 80,000$ December production activity: $\begin{array} { l r r r r } \text { Materials requisitioned } & \$ 4,000 & \$ 4,800 & \$ 7,200 & \$ 16,000 \\\text { Direct labour cost } & \$ 2,400 & \$ 3,600 & \$ 4,000 & \$ 10,000 \\\text { Machine hours } & 400 & 700 & 900 & 2,000 \\\text { Labour hours } & 120 & 180 & 200 & 500\end{array}$ Actual manufacturing overhead cost incurred in November 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. Using the same assumption as D, calculate the gross profit for Job 10. F. Using the same assumption as C, calculate the cost assigned to ending Work-in-Process Inventory. G. Assuming no beginning Finished Goods Inventory and the same assumptions as A through F, calculate the cost assigned to ending Finished Goods Inventory. H. How much was overhead overapplied or underapplied?

Match each following cost flows with their corresponding job-costing event from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Cost of materials is removed from Raw Materials Inventory account and added to Work-in-Process Inventory

Match each following cost flows with their corresponding job-costing event from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Costs of a product are removed from Finished Goods Inventory and added to Cost of Goods Sold