Question 1

Briefly describe how manufacturing firms dispose of overapplied or underapplied factory overhead.

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Question 2

A material amount of overapplied or underapplied overhead should be disposed of by allocating it to:
A) Cost of goods sold and finished goods.
B) Finished goods and goods in process.
C) Goods in process, finished goods, and cost of goods sold.
D) Goods in process.
E) Raw materials, goods in process, and finished goods.

Accepted Answer

Overapplied or underapplied overhead should be allocated to goods in process, finished goods, and cost of goods sold in order to adjust the value of these accounts and accurately reflect the actual overhead costs for each. Allocating it to only one account, such as cost of goods sold, may distort the profitability of the company. Allocating it to all three accounts ensures that the cost of goods sold, inventory, and gross profit are all adjusted appropriately.

Question 3

Match the following terms to the appropriate definition:
(a)General accounting system
(b)Time ticket
(c)Clock card
(d)Materials requisition
(e)Underapplied overhead
(f) Job order manufacturing
(g) Overapplied overhead
(h) Job cost sheet
(i) Job order cost accounting system
(j) Predetermined overhead allocation rate
(k) Materials ledger card
_______ (1)The production of products in response to special orders; also called customized production.
_______ (2)A source document that is used to record the number of hours an employee works and to determine the total labor cost for each pay period.
_______ (3)The amount by which the overhead applied to jobs in a period with the predetermined overhead allocation rate exceeds the overhead incurred in a period.
_______ (4)An accounting system for manufacturing activities based on the periodic inventory system.
_______ (5)The rate established prior to the beginning of a period that relates estimated overhead to an allocation factor such as estimated direct labor and is used to assign overhead cost to a job.
_______ (6)A cost accounting system designed to determine the cost of producing each job or job lot.
_______ (7)A source document that production managers use to request materials for manufacturing and that is used to assign materials costs to specific jobs or to overhead.
_______ (8)A perpetual record that is updated each time units of raw material are both purchased and issued for use in production.
_______ (9)A source document that is used to report how much time an employee spent working on a job or on overhead activities and then to determine the amount of direct labor to charge to the job or the amount of indirect labor to charge to overhead.
_______(10)The amount by which overhead incurred in a period exceeds the overhead applied to jobs with the predetermined overhead allocation rate.
_______(11)A separate record maintained for each job in a job order costing system; it shows direct materials,direct labor,and overhead for each job.

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Question 4

What is a cost accounting system? What are the two basic types of cost accounting systems?

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Question 5

Describe the purpose of a job cost sheet and explain what information is found on the job cost sheet.

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Question 6

Overhead is applied as a percent of direct labor costs.Estimated overhead and direct labor costs for the year were $250,000 and $125,000,respectively.During the year,actual overhead was $248,000 and actual direct labor cost was $123,000.The entry to close the over- or underapplied overhead at year-end,assuming an immaterial amount,would include:
A) A debit to Cost of Goods Sold for $2,000.
B) A debit to Factory Overhead for $2,000.
C) A credit to Finished Goods Inventory for $2,000.
D) A debit to Goods in Process Inventory for $2,000.
E) A credit to Cost of Goods Sold for $2,000.

Accepted Answer

Predetermined OH rate = $250,000/$125,000=200%
OH applied = $123,000(2.0) = $246,000
Applied $246,000 - Actual $248,000 =$2,000 underapplied (debit balance)

Question 7

Erlander Company uses a job order cost accounting system.On November 1,$15,000 of direct materials and $3,500 of indirect materials were requisitioned for production.Prepare the general journal entry to record this requisition.

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Question 8

Plumley Ad Agency contracted with a company to prepare an ad campaign.Plumley uses a job order costing system.Plumley estimates that the job will take 145 designer hours at $90 per hour and 85 staff hours at $45 per hour.Plumley uses two overhead rates in applying overhead to jobs: Designer-related at $100 per designer hour and staff-related at $50 per staff hour.Determine the total estimated cost for this job.

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Question 9

Explain what a predetermined overhead allocation rate is,how it is calculated,and why it is used.

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Question 10

The Terrapin Manufacturing Company has the following job cost sheets on file.They represent jobs that have been worked on during June of the current year.This table summarizes information provided on each sheet:
 $\begin{array}{lll}
&\text { Number } \
\text { Total Cost }&\text { Incurred }&\text { Status of Job }\ 
951 & \$ 4,200 & \text { Finished and } \
&&\text { delivered } \
952 & \$ 7,700 & \text { Unfinished }\
953 & \$ 9,300 & \text { Finished and unsold } \
954 & \$ 11,100 & \text { Finished and }\ 
&&\text { delivered } \
955 & \$ 3,000 & \text { Finished and unsolc } \
956 & \$ 5,500 & \text { Finished and }\
&&\text { delivered } \
957 & \$ 35,000 & \text { Unfinished } \
958 & \$ 3,200 & \text { Finished and }\
&&\text { delivered } \
959 & \$ 500 & \text { Unfinished } \
960 & \$ 22,110 & \text { Unfinished } \
961 & \$ 7,200 & \text { Finished and unsolc } \
962 & \$ 8,500 & \text { Unfinished } \
963 & \$ 11,200 & \text { Finished and unsold } 
\end{array}$
 
a.What is the cost of the goods in process inventory on June 30?
b.What is the cost of the finished goods inventory on June 30?
c.What is the cost of goods sold for the month of June?

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Question 11

Describe the flow of labor costs in a job order costing system and identify the documents used in the system.

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Question 12

The Johnson Manufacturing Company has the following job cost sheets on file.They represent jobs that have been worked on during March of the current year.This table summarizes information provided on each sheet:
 $\begin{array}{lll}
&\text { Total Cost }\
\text { Number } & \text { Incurred }& \text { Status of Job }\
\hline444 & \$ 15,050 & \text { Finished and } \
&&\text { delivered }\
445 & \$ 22,400 & \text { Finished and }\
&&\text { delivered }\
446 & \$ 7,500 & \text { Finished and unsold } \
447 & \$ 4,300 & \text { Finished and } \
& & \text { delivered }\
448 & \$ 33,000 & \text { Finished and unsold } \
449 & \$ 62,000 & \text { Finished and unsolc } \
450 & \$ 14,600 & \text { Unfinished } \
451 & \$ 22,200 & \text { Finished and }\
& & \text { delivered }\
452 & \$ 3,600 & \text { Unfinished } \
453 & \$ 1,000 & \text { Unfinished }
\end{array}$
 
A. What is the cost of goods sold for the month of March?
B. What is the cost of the goods in process inventory on March 31?
C. What is the cost of the finished goods inventory on March 31?

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Question 13

Explain how a service firm,such as an advertising agency,might use job order costing.

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Question 14

Key Manufacturing Co.applies factory overhead to production on the basis of direct labor costs.Assume that at the beginning of the current year the company estimated that direct material costs would be $178,800,direct labor costs would be $154,000,and factory overhead costs would be $231,000.
A. If the $28,000 cost of Key's goods in process inventory included $5,200 of direct labor cost, what amount of direct materials cost was included?
B. If $8,100 of the company's $34,300 finished goods inventory was direct materials cost, determine the direct labor cost and factory overhead cost of the finished goods inventory.

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Question 15

RC Corp.uses a job order cost accounting system.During the month of April,the following events occurred:
A. Purchased raw materials on credit, $32,000.
B. Raw materials requisitioned: $25,800 as direct materials and $10,500 indirect materials.
C. Paid factory payroll for the month totaling $37,700 which includes $8,200 indirect labor.
D. Assigned the factory payroll to jobs and overhead.
Make the necessary journal entries to record the above transactions and events.

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Question 16

The Dina Corp.has applied overhead to jobs during the period as follows:
$$\begin{array} { l r } 
\text { Jobs finished and sold } & \$ 46,000 \
\text { Jobs started and in process } & 54,000 \
\text { Jobs finished and unsold } & 100,000
\end{array}$$

The application of overhead has resulted in a $5,600 credit balance in the Factory Overhead account,and this amount is not material.The entry to dispose of this remaining factory overhead balance is:
A. 
$\begin{array}{llr}
  \text {Cost of Goods Sold  } &5,600\
 \text { Factory Overhead } &&5,600\
\end{array}$

B. 
$\begin{array}{llr}
  \text {  Factory Overhead } &5,600\
 \text {  Cost of Goods Sold} &&5,600\
\end{array}$

C.
$\begin{array}{llr}
  \text {  Factory Overhead } &5,600\
 \text {Goods in Process  } &&5,600\
\end{array}$

D.
$\begin{array}{llr}
  \text { Goods in Process } &5,600\
 \text { Factory Overhead  } &&5,600\
\end{array}$
 
E.$\text { No entry is needed.}$

A) Journal entry A
B) Journal entry B
C) Journal entry C
D) Journal entry D
E) Journal entry E

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Question 17

Overhead is applied as a percent of direct labor costs.Estimated overhead and direct labor costs for the year were $112,500 and $125,000,respectively.During the year,actual overhead was $107,400 and actual direct labor cost was $120,000.The entry to close the over- or underapplied overhead at year-end,assuming an immaterial amount,would include:
A) A debit to Cost of Goods Sold for $600.
B) A credit to Factory Overhead for $600.
C) A credit to Finished Goods Inventory for $600.
D) A debit to Goods in Process Inventory for $600.
E) A credit to Cost of Goods Sold for $600.

Accepted Answer

Predetermined OH rate = $112,500/$125,000 = 90%;
OH applied = $120,000(.9) = $108,000
Applied $108,000 - Actual $107,400 = $600 overapplied (credit balance)

Question 18

RC Corp.uses a job order cost accounting system.During the month of April,the following events occurred:
A. Purchased raw materials on credit, $32,000.
B. Raw materials requisitioned: $25,800 as direct materials (Job 1:$4,200, Job 2: $7,500, Job 3: $3,600 and Job 4: $10,500) and $10,500 indirect materials.
C. Paid factory payroll for the month totaling $37,700 which includes $8,200 indirect labor.
D. Assigned the factory payroll to jobs and overhead. (Job 1:$7,000, Job 2: $9,800, Job 3: $3,000 and Job 4: $9,700)
E. Overhead was assigned at a rate of 50% of direct labor cost.
Determine the total cost of each job.

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Question 19

How does job order cost accounting affect the company Astor and Black?

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Question 20

Describe how materials flow through a job order cost accounting system and identify the key documents in the system.

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Quiz 15: Job Order Costing and Analysis