Question 1

Describe the difference between normal costing,actual costing,and standard costing.

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Question 2

Music Master Components produces parts for concert hall sound systems.The parts are produced to specification by their customers,who pay either a fixed price (the price does not depend directly on the cost of the job)or price equal to recorded cost plus a fixed fee (cost plus).For the upcoming year (year 2),Music Master expects only two clients (Client 1 and Client 2).The work done for Client 1 will all be done under fixed-price contracts while the work done for Client 2 will all be done under cost-plus contracts.Manufacturing overhead for year 2 is estimated to be $10 million.Other budgeted data for year 2 include:

Required:
a.Compute the predetermined rate assuming that Music Master Components uses machine-hours to apply overhead.b.Compute the predetermined rate assuming that Music Master Components uses direct labor cost to apply overhead.c.Which allocation base will provide higher income for Music Master Components?
d.Is it ethical to choose an allocation method based on which one leads to higher income for the firm?

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Question 3

How does job costing for a service organization differ from job costing for a manufacturer?

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Question 4

What are characteristics of companies that are likely to use a job cost system?

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Question 5

Santos Company is a manufacturing firm that uses job-order costing.At the beginning of the year,the company's inventory balances were as follows:
$$\begin{array} { | l | r | } 
\hline \text { Raw materials } & \$ 24,000 \
\hline \text { Work-ir-Process } & \$ 73,000 \
\hline \text { Finished goods } & \$ 27,000 \
\hline
\end{array}$$ 
The company applies overhead to jobs using a predetermined overhead rate based on machine-hours.At the beginning of the year,the company estimated that it would work 45,000 machine-hours and incur $180,000 in manufacturing overhead cost.The following transactions were recorded for the year:
a.Raw materials were purchased,$416,000.b.Raw materials were requisitioned for use in production,$420,000 ($380,000 direct and $40,000 indirect).c.The following employee costs were incurred: direct labor,$414,000;indirect labor,$60,000;and administrative salaries,$212,000.d.Selling costs,$141,000.e.Factory utility costs,$20,000.f.Depreciation for the year was $81,000 of which $73,000 is related to factory operations and $8,000 is related to selling,general,and administrative activities.g.Manufacturing overhead was applied to jobs.The actual level of activity for the year was 48,000 machine-hours.h.The cost of goods manufactured for the year was $1,004,000.i.Sales for the year totaled $1,416,000 and the costs on the job cost sheets of the goods that were sold totaled $989,000.j.The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold.Required:
Prepare the appropriate journal entry for each of the items above (a.through j. ).You can assume that all transactions with employees,customers,and suppliers were conducted in cash.

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Question 6

Melbourne Consultants works for only two clients: a large for-profit corporation and a small environmental not-for-profit agency.The fee charged for work is based on cost.In deciding how to allocate overhead,the CFO of Melbourne Consultants decides to use the base that allocates the most cost to the large corporation.Is this ethical?

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Question 7

Why might a company use a predetermined rate for applying overhead rather than just apply actual overhead?

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Question 8

In June,Robust Engineering worked on three contracts: 1,200 hours for Tico Company,1,100 hours for Navel LLC and 3,400 for Lutron Corp.Robust bills clients at the rate of $150 per hour;labor cost for its engineering staff is $45 per hour.The total number of hours worked in June was 6,000 (any untraced hours are considered overhead),and non-labor overhead costs were $325,000.Overhead is applied to clients at $55 per labor-hour.In addition,Robust had $243,000 in marketing and administrative costs.All transactions are on account.All services were billed.Required:
a.Determine the cost of each of the three jobs.b.What is the amount of over- or underapplied overhead?
c.How much operating profit did Robust make in June? Assume the over- or underapplied overhead is not closed out each month.

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Question 9

Hsu Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year.At the beginning of the most recently completed year,the company estimated the labor-hours for the upcoming year at 32,000 labor-hours.The estimated variable manufacturing overhead was $7.17 per labor-hour and the estimated total fixed manufacturing overhead was $584,320.The actual labor-hours for the year turned out to be 33,300 labor-hours.Required:
Compute the company's predetermined overhead rate for the recently completed year.

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Question 10

Describe three possible unethical actions that can cause impropriety in job costing and give examples.1)Misstating the stage of completion;2)charging costs to wrong jobs;3)misrepresenting the cost of jobs.

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Question 11

Cherry Company is a manufacturing firm that uses job-order costing.The company's inventory balances were as follows at the beginning and end of the year:
$$\begin{array} { | l | r | r | } 
\hline & \begin{array} { r } 
\text { Beginning } \
\text { Balance }
\end{array} & \text { Enoing Balance } \
\hline \text { Raw materials } & \$ 11,000 & \$ 15,000 \
\hline \text { Work-ir-Process } & \$ 32,000 & \$ 14,000 \
\hline \text { Finished goods } & \$ 108,000 & \$ 123,000 \
\hline
\end{array}$$ 
The company applies overhead to jobs using a predetermined overhead rate based on machine-hours.At the beginning of the year,the company estimated that it would work 17,000 machine-hours and incur $272,000 in manufacturing overhead cost.The following transactions were recorded for the year:
• Raw materials were purchased,$416,000.• Raw materials were requisitioned for use in production,$412,000 ($376,000 direct and $36,000 indirect).• The following employee costs were incurred: direct labor,$330,000;indirect labor,$69,000;and administrative salaries,$157,000.• Selling costs,$113,000.• Factory utility costs,$29,000.• Depreciation for the year was $121,000 of which $114,000 is related to factory operations and $7,000 is related to selling,general,and administrative activities.• Manufacturing overhead was applied to jobs.The actual level of activity for the year was 15,000 machine-hours.• Sales for the year totaled $1,282,000.Required:
a.Prepare a schedule of cost of goods manufactured in good form.b.Was the overhead underapplied or overapplied? By how much?
c.Prepare an income statement for the year in good form.The company closes any underapplied or overapplied overhead to Cost of Goods Sold.

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Question 12

Calvin Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year.At the beginning of the most recently completed year,the company estimated the labor-hours for the upcoming year at 13,000 labor-hours.The estimated variable manufacturing overhead was $2.35 per labor-hour and the estimated total fixed manufacturing overhead was $156,130.Required:
Compute the company's predetermined overhead rate.

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Question 13

Why is control of materials important from a managerial planning perspective?

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Question 14

Wang's Corporation applies overhead based upon machine-hours.Budgeted factory overhead was $325,000 and budgeted machine-hours were 13,000.Actual factory overhead was $312,330 and actual machine-hours were 12,660.Before disposition of over- or underapplied overhead,the cost of goods sold was $725,000 and ending inventories were as follows:
$$\begin{array} { | l | r | } 
\hline \text { MIP } & \$ 150,000 \
\hline \text { Finished goods } & \underline { 375,000 } \
\hline \text { Total } & \$ 525,000 \
\hline
\end{array}$$
Required:
a.Compute the amount of overhead applied to production.b.Prepare the journal entry to dispose of the over/under-applied overhead using the write-off to cost of goods sold approach.c.Prepare the journal entry to dispose of the over/under-applied overhead using the proration approach.

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Question 15

Ramos Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year.Data for the most recently completed year appear below:
$\begin{array}{|c|r|l|}
\hline \begin{array}{l}
\text { Estimates made at the beginning of } \
\text { the year: }
\end{array} & & \
\hline \text { Estimated labor-hours } & 24,000 & \
\hline \begin{array}{l}
\text { Estimated variable } \
\text { manufacturing owerhead }
\end{array} & \$ 6.86 & \begin{array}{l}
\text { per labor- } \
\text { hour }
\end{array} \
\begin{array}{c}
\text { Estimated total fteed } \
\text { manufacturing owerhead }
\end{array} & \$ 394,560 & \
\hline \text { Actual labor-hours tor the year } & 24,500 & \
\hline
\end{array}$
Required:
Compute the company's predetermined overhead rate for the recently completed year.

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Question 16

Describe two alternative approaches to the handling of over- or underapplied overhead.

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Question 17

ProBuild Contractors sells to government agencies using a cost-plus contract and to pri­vate firms using fixed price contracts.What choices does ProBuild have in the design of its job costing system that affect the cost of the government jobs?

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Question 18

Harkin Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year.Data for the upcoming year appear below:
$$\begin{array} { | l | r | l | } 
\hline \text { Estimated machine-hours } & 73,000 & \
\hline \text { Estimated variable } & \$ 3.49 & \begin{array} { l } 
\text { per machine- } \
\text { hour }
\end{array} \
\hline \begin{array} { l } 
\text { manufacturing overhead } \
\text { manufacturing overhead }
\end{array} & \$ 838,770 & \
\hline
\end{array}$$
Required:
Compute the company's predetermined overhead rate.

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Question 19

Dickerson Corporation has provided the following data for the month of April:
 $$\begin{array} { | l | r | r | } 
\hline \text { Imuentories: } & \text { Beginning } & \text { Encing } \
\hline \text { Raw materials } & \$ 21,000 & \$ 35,000 \
\hline \text { Work-ir-Process } & \$ 17,000 & \$ 19,000 \
\hline \text { Finished goods } & \$ 46,000 & \$ 38,000 \
\hline
\end{array}$$ 
$\begin{array}{c}
\begin{array}{|l|}
\hline \text {Additional information:}\
\hline \text {Raw materials purchases}\
\hline \text {Direct labor cost}\
\hline \text {Manufacturing overhead cost incurred}\
\hline \text {Indirect materials included in manufacturing}\
\text {overhead cost incurred}\
\hline \text {Manufacturing owerhead cost applied to Work-in-}\
\text {Process}\
\hline 
\end{array}
\begin{array}{l|}
\hline \

\hline \$ 76,000 \
\hline \$ 81,000 \
\hline \$ 42,000\
\hline  \$ 6,000 \
\
\hline  \$ 44,000 \
\
\hline 
\end{array}
\end{array}$

Required:
Prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold in good form.

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Question 20

In the context of job costing,what are projects? What additional costing issues are there with projects?

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Quiz 7: Job Costing

Describe the difference between normal costing,actual costing,and standard costing.

How does job costing for a service organization differ from job costing for a manufacturer?

What are characteristics of companies that are likely to use a job cost system?

Why might a company use a predetermined rate for applying overhead rather than just apply actual overhead?

Describe three possible unethical actions that can cause impropriety in job costing and give examples.1)Misstating the stage of completion;2)charging costs to wrong jobs;3)misrepresenting the cost of jobs.

Why is control of materials important from a managerial planning perspective?

Describe two alternative approaches to the handling of over- or underapplied overhead.

ProBuild Contractors sells to government agencies using a cost-plus contract and to private firms using fixed price contracts.What choices does ProBuild have in the design of its job costing system that affect the cost of the government jobs?

In the context of job costing,what are projects? What additional costing issues are there with projects?

Quiz 7: Job Costing

Describe the difference between normal costing,actual costing,and standard costing.

How does job costing for a service organization differ from job costing for a manufacturer?

What are characteristics of companies that are likely to use a job cost system?

Why might a company use a predetermined rate for applying overhead rather than just apply actual overhead?

Describe three possible unethical actions that can cause impropriety in job costing and give examples.1)Misstating the stage of completion;2)charging costs to wrong jobs;3)misrepresenting the cost of jobs.

Why is control of materials important from a managerial planning perspective?

Describe two alternative approaches to the handling of over- or underapplied overhead.

ProBuild Contractors sells to government agencies using a cost-plus contract and to pri­vate firms using fixed price contracts.What choices does ProBuild have in the design of its job costing system that affect the cost of the government jobs?

In the context of job costing,what are projects? What additional costing issues are there with projects?

ProBuild Contractors sells to government agencies using a cost-plus contract and to private firms using fixed price contracts.What choices does ProBuild have in the design of its job costing system that affect the cost of the government jobs?