Question 1

Traditionally companies have used direct labor hours, direct labor costs and machine hours as the primary cost drivers of manufacturing overhead costs.

Accepted Answer

This is true. Direct labor hours, direct labor costs, and machine hours have been commonly used as the primary cost drivers for manufacturing overhead costs in traditional costing systems. However, with the rise of automation and more complex manufacturing processes, other cost drivers such as activity-based costing and process costing have become more prevalent in recent years.

Question 2

The records at Smith and Jones, Inc. show that Job 110 is charged with $10,000 of direct materials and $13,000 of direct labor. Smith and Jones, Inc. allocate manufacturing overhead at 85% of direct labor cost. What is the total cost of Job No. 110?

Accepted Answer

Total manufacturing overhead allocated to Job No. 110 = ($13,000 x 85%) = $11,050
Total cost of Job No. 110 = Direct materials + Direct labor + Manufacturing overhead allocated
= $10,000 + $13,000 + $11,050
= $34,050

Question 3

On January 1, Jackson, Inc.'s Work-in-Process Inventory account showed a balance of $66,700. During the year, materials requisitioned for use in production amounted to $70,700, of which $67,600 represented direct materials. Factory wages for the period were $208,000 of which $186,200 were for direct labor. Manufacturing overhead is allocated on the basis of 60% of direct labor cost. Actual overhead was $116,160. Jobs costing $353,190 were completed during the year. The December 31 balance in Work-in-Process Inventory is ________.

Accepted Answer

To find the December 31 balance in Work-in-Process Inventory, we need to calculate the total cost of goods manufactured (i.e. the cost of goods completed in the current period).

Direct materials used = $67,600
Direct labor = $186,200
Manufacturing overhead = 60% * $186,200 = $111,720
Total manufacturing costs = $67,600 + $186,200 + $111,720 = $365,520
Total cost of goods manufactured = $365,520 + Beginning WIP Inventory ($66,700) - Ending WIP Inventory

We need to calculate the Ending WIP Inventory.

Total manufacturing costs = $365,520
Add: Beginning WIP Inventory = $66,700
Less: Cost of goods completed = $353,190
Equals: Ending WIP Inventory = $79,030

Therefore, the December 31 balance in Work-in-Process Inventory is $79,030. Option D is the correct answer.

Question 4

The cost of goods manufactured is recorded with a debit to the Finished Goods Inventory account and a credit to the Work-in-Process Inventory account.

Accepted Answer

The cost of goods manufactured includes the cost of direct materials, direct labor, and manufacturing overhead used in production. These costs are initially recorded in the Work-in-Process Inventory account, which is debited as the costs are incurred. When the goods are completed, the cost is transferred from Work-in-Process Inventory to Finished Goods Inventory, which is then debited. Therefore, the cost of goods manufactured is recorded with a debit to Finished Goods Inventory and a credit to Work-in-Process Inventory.

Question 5

At the beginning of the year, Conway Manufacturing had the following account balances:      The following additional details are provided for the year:
$$\begin{array} { | l | r | } 
\hline \text { irect materials placed in production } & \$ 82,000 \
\hline \text { Direct labor incurred } & 191,400 \
\hline \text { Manufacturing overhead incurred } & 302,000 \
\hline \begin{array} { l } 
\text { Manufacturing overhead allocated to } \
\text { production }
\end{array} & 295,700 \
\hline \text { Cost of jobs completed and transferred } & 500,900 \
\hline
\end{array}$$ The ending balance in the Work-in-Process Inventory account is a ________.

Accepted Answer

The answer of At the beginning of the year, Conway...

Question 6

The predetermined overhead rate is calculated ________.

Accepted Answer

The predetermined overhead rate is calculated before the accounting period begins based on estimated overhead costs and estimated activity levels. It is used to apply overhead costs to production during the accounting period.

Question 7

In a machine-intensive production environment, the most accurate cost driver of manufacturing overhead costs is usually ________.

Accepted Answer

In a machine-intensive production environment, the most accurate cost driver for manufacturing overhead costs is usually machine hours. This is because the machines are the primary source of overhead costs, and the amount of time they are used correlates directly with the amount of overhead costs incurred. Using machine hours as the cost driver allows for a more accurate allocation of overhead costs to products or services.  Direct labor costs, direct labor hours, and direct materials used may also be important cost drivers, but in a machine-intensive production environment, machine hours is usually the most accurate.

Question 8

The cost of goods manufactured is recorded with a debit to the Work-in-Process Inventory account and a credit to the Cost of Goods Manufactured account.

Accepted Answer

The cost of goods manufactured is recorded with a debit to the Finished Goods Inventory account and a credit to the Work-in-Process Inventory account, reflecting the transfer of completed goods out of production into finished inventory.

Question 9

When a job is completed, the total cost of the job is recorded with a debit to Finished Goods Inventory and a credit to Work-in-Process Inventory.

Accepted Answer

This statement is true according to the traditional accounting system, which assumes a manufacturing process. The job's final cost is recorded as an increase in the finished goods inventory and a decrease in the work-in-process inventory.

Question 10

When goods are transferred from the Work-in-Process Inventory account to the Finished Goods Inventory account, ________.

Accepted Answer

When goods are transferred from the Work-in-Process Inventory account to the Finished Goods Inventory account, there is no change in the total assets of the company, since the goods are still part of the inventory. However, there is a decrease in the Work-in-Process Inventory account and an increase in the Finished Goods Inventory account, which affects the composition of the assets. There is no impact on liabilities or equity.

Question 11

Altima, Inc. finished Job A40 on the last working day of the year. It utilized $360 of direct materials and $3370 of direct labor. Altima uses a predetermined overhead allocation rate based on direct labor costs, which has been fixed at 40%. The entry to record the completion of the job should involve a ________.

Accepted Answer

The correct entry involves debiting Finished Goods Inventory and crediting Work-in-Process Inventory for the total cost of the job, which includes direct materials, direct labor, and allocated overhead. The total cost is calculated as $360 (direct materials) + $3370 (direct labor) + ($3370 * 40% overhead rate) = $5078.

Question 12

Metropolitan Enterprises reports the following information at December 31:
  Requirements
1. What is the actual manufacturing overhead of Metropolitan Enterprises?
2. What is the allocated manufacturing overhead?
3. Is manufacturing overhead underallocated or overallocated? By how much?

Accepted Answer

The answer of Metropolitan Enterprises reports the following information at...

Question 13

Caltran, Inc. completed manufacturing Job 445. It included $310 of direct materials cost, $1220 of direct labor cost, and $560 of allocated manufacturing overhead. Which of the following is the correct journal entry needed to record the completed job?

Accepted Answer

The correct journal entry transfers the total cost of the completed job from Work-in-Process Inventory to Finished Goods Inventory, which is $310 + $1220 + $560 = $2090.

Question 14

At the beginning of the year, Judge Manufacturing had the following account balances:      The following additional details are provided for the year:
$$\begin{array} { | l | r | } 
\hline \text { irect materials placed in production } & \$ 83,100 \
\hline \text { Direct labor incurred } & 191,100 \
\hline \text { Manufacturing overhead incurred } & 301,900 \
\hline \begin{array} { l } 
\text { Manufacturing overhead allocated to } \
\text { production }
\end{array} & 296,700 \
\hline \text { Cost of jobs completed and transferred } & 501,800 \
\hline
\end{array}$$ The ending balance in the Finished Goods Inventory account is a ________.

Accepted Answer

The answer of At the beginning of the year, Judge...

Question 15

Melinda, Inc. estimates manufacturing overhead costs for the coming year at $225,000, which will be allocated based on direct labor hours. Melinda estimates 9,000 direct labor hours for the coming year. In January, Job A33 was completed, which required 8 direct labor hours and 34 machine hours. Provide the journal entry to allocate manufacturing overhead to the job. Omit explanation.

Accepted Answer

The answer of Melinda, Inc. estimates manufacturing overhead costs for...

Question 16

Haverhill Products completed Job 440 and several other jobs during the year. In addition to direct labor and direct materials cost, Haverhill allocated $450 of manufacturing overhead to the job. Provide the journal entry for the allocation of manufacturing overhead. Omit explanation.

Accepted Answer

The answer of Haverhill Products completed Job 440 and several...

Question 17

Forsyth, Inc. uses estimated direct labor hours of 240,000 and estimated manufacturing overhead costs of $1,150,000 in establishing its predetermined overhead allocation rate for the year. Actual results showed the following: $$\begin{array} { | l | l | } 
\hline \text { Actual manufacturing overhead } & \$ 800,000 \
\hline \text { Allocated manufacturing overhead } & \$ 825,000 \
\hline
\end{array}$$ The number of direct labor hours worked during the period was ________. (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.)

Accepted Answer

The answer of Forsyth, Inc. uses estimated direct labor hours...

Question 18

Divit has been given the task of calculating the predetermined overhead rate for Eden Enterprises. In order to calculate the rate, Divit must know ________.

Accepted Answer

In order to calculate the predetermined overhead rate, Divit needs to know the estimated overhead costs for the period and the estimated quantity of the overhead allocation base. This information is necessary to calculate the rate, which is then applied to actual production to allocate overhead costs. The actual overhead costs and actual quantity of the overhead allocation base are not used in calculating the predetermined overhead rate.

Question 19

Ivade, Inc. uses a predetermined overhead allocation rate of $75 per direct labor hour. In January, Ivade completed Job B23, which utilized 20 direct labor hours. Provide the journal entry to allocate overhead to the job. Omit explanation.

Accepted Answer

The answer of Ivade, Inc. uses a predetermined overhead allocation...

Question 20

On January 1, Biden, Inc.'s Work-in-Process Inventory account had a balance of $30,300. During the year, $58,500 of direct materials was placed into production. Manufacturing wages incurred amounted to $84,000, of which $64,500 were for direct labor. Manufacturing overhead is allocated on the basis of 120% of direct labor cost. Actual manufacturing overhead was $90,500. Jobs costing $220,500 were completed during the year. What is the December 31 balance of Work-in-Process Inventory?

Accepted Answer

The December 31 balance of Work-in-Process Inventory is calculated as follows:1. Start with the beginning balance: $30,300.2. Add direct materials used: $58,500.3. Add direct labor: $64,500.4. Add allocated manufacturing overhead (120% of direct labor): $64,500 * 120% = $77,400.5. Subtract the cost of jobs completed: $220,500.Calculation:$30,300 (beginning balance) + $58,500 (direct materials) + $64,500 (direct labor) + $77,400 (allocated overhead) - $220,500 (jobs completed) = $10,200.Therefore, the December 31 balance of Work-in-Process Inventory is $10,200.

Quiz 17: Job Order Costing