Ch19FAP19e

Chapter 19

Job Order Cost Accounting

QUESTIONS

1. Factory overhead is not identified with specific units (jobs) or batches (job lots). Therefore, to assign costs, estimates of the relation between factory overhead cost and job or job lot are necessary. Also, since job order cost accounting is a perpetual system, we need to estimate a predetermined overhead rate to compute (perpetual) inventory costs. This estimated amount also helps job order companies determine prices on a timely basis.

2. Several other factors (allocation bases) are possible and reasonable. These common factors often include direct materials or machine hours.

3. The job order cost sheet captures information on cost and quantity of direct material and direct labor, and on the amount of factory overhead applied to the respective job or job lot. Management and employees use this information to monitor costs during production and to estimate total cost of production.

4. Each job is assigned a subsidiary ledger account. This account serves as the “posting account” (accumulates all increases and decreases) during production for direct material, direct labor, and applied factory overhead. The collection of job cost sheets for all of the jobs in process make up a subsidiary ledger controlled by the Goods in Process Inventory account in the general ledger.

When a job is finished, its job cost sheet is completed and moved from the file of jobs in process to the file of finished jobs awaiting delivery to customers. This latter file acts as a subsidiary ledger controlled by the Finished Goods Inventory account. In this way, management and employees can obtain the costs, direct and indirect, associated with any job or job lot at any time.

5. A debit (increase) to Goods in Process Inventory for direct materials, a debit (increase) to Factory Overhead for indirect materials, and a credit (decrease) to Raw Materials Inventory.

6. The materials requisition slip is designed to track the movement of materials from raw materials to production. It also serves as an internal control document because without the slip the inventory department should not release inventory to production.

7. The clock card is used to record the number of hours each employee works and is used to compute total payroll. The time ticket is used to record how much time an employee spends on each job. Time tickets are also used to determine the amount of overhead to charge to jobs when overhead is based on direct labor.

©McGraw-Hill Companies, 2009

Solutions Manual, Chapter 19 1

8. Debits (increases) to factory overhead are the recording of actual overhead costs, such as indirect materials, indirect labor, factory rent, and factory insurance. Credits (decreases) represent the allocation of factory overhead to jobs or job lots.

9. Assuming that the overapplied or underapplied overhead is immaterial, it is closed to the Cost of Goods Sold account. However, if the amount is material—meaning it would change business decisions that rely on the information—then the amount of overapplied or underapplied overhead is allocated to goods in process, finished goods, and cost of goods sold (using an allocation base such as direct labor).

10. This production run should be accounted for as a job lot (batch). Although individual iPods could be viewed as individual jobs, the costs of tracking this detailed information would outweigh the benefits. Determining the cost of the batch should provide management and employees with sufficient information about this product for all decision making purposes.

11. A predetermined factory overhead rate must be calculated for at least two reasons: (1) Not all costs are known in advance, yet the costs must be applied to products during the current period. (2) A predetermined rate is used to spread indirect costs to products and/or services throughout an accounting period, where overhead costs are not incurred uniformly throughout the period and production may not be uniform throughout the period. For instance, property taxes on the factory building of $20,000 may be paid in July, but some of that $20,000 must be allocated to all items produced during the year, January through December. A predetermined rate is necessary, because we must estimate the rate at the beginning of the year, based on estimated costs and activity, before the period begins.

12. Each patient in a hospital can be viewed as a “job.” In this case, a job order cost sheet would be used to capture cost of direct materials (supplies, medicine, and so forth), direct labor, and hospital overhead.

13. Each of the 30 luxury motorcycles will likely be accounted for as an individual job. Although similar in many respects, each would have custom features that would impact costs. As the luxury motorcycles are shipped to dealers each will have a separate invoice detailing the cost associated with producing that motorcycle. Also, the price of a custom-made motorcycle is probably large enough (in the area of $20,000 to $50,000) that each would be accounted for individually.

14. GeekSquad employees can use job cost sheets to accumulate the costs (e.g. labor and materials) used on each job. Managers can use this job cost information to monitor whether the GeekSquad is meeting its target costs and producing reasonable profits. This information can be used to adjust the prices of certain services and/or cease providing certain services if the costs cannot be controlled to yield a reasonable profit.


Fundamental Accounting Principles, 19th Edition2

QUICK STUDIES

Quick Study 19-1 (5 minutes)

Manufactured as a job: 1, 4, 5

Manufactured as a job lot: 2, 3, 6


JOB COST SHEETDirect materials cost Q-4698....................................................................................$2,500 Q-4725.................................................................................... 2,000 $ 4,500Direct labor cost W-3393.................................................................................... 1,200 W-3479.................................................................................... 900 W-3559.................................................................................... 600 2,700Overhead ($2,700 X 110%)......................................................... 2,970 Total cost.................................................................................. $10,170


Raw Materials Inventory................................................25,000 Cash........................................................................... 25,000 To record raw material purchases.

Factory Overhead...........................................................6,000 Raw Materials Inventory.......................................... 6,000 To record raw materials used in production.

Goods in Process Inventory..........................................16,000 Raw Materials Inventory.......................................... 16,000 To record raw materials used in production.




Factory Payroll...............................................................75,000 Cash........................................................................... 75,000 To record factory payroll.

Goods in Process Inventory..........................................46,000Factory Overhead...........................................................29,000 Factory Payroll......................................................... 75,000 To record direct and indirect labor.


1. Factory overhead, $58,500 / Direct labor, $234,000 = 25%

2. Factory overhead, $58,500 / Direct materials, $292,000 = 20%


Goods in Process Inventory (Job 65A)........................234,000 Factory Overhead..................................................... 234,000

To apply overhead to job lot [($350,000–$90,000) x 90%].


Cost of Goods Sold........................................................25,000 Factory Overhead*................................................... 25,000 To assign underapplied overhead.

*Computation of over- or underapplied overheadActual overhead.................................................................$475,000Overhead applied ($300,000 x 150%)............................... 450,000 Underapplied overhead.....................................................$ 25,000



EXERCISES

Exercise 19-1 (10 minutes)

1. G 3. D 5. A 7. B

2. E 4. F 6. C


1. The cost of direct materials requisitioned in the month equals the total direct materials costs accumulated on the three jobs less the amount of direct materials cost assigned to Job 102 in May:

Job 102 ............................................................ $25,000Less prior costs.............................................. (13,000 ) $ 12,000Job 103 ............................................................ 59,000Job 104 ............................................................ 56,000 Total materials used (requisitioned)............. $127,000

2. Direct labor cost incurred in the month equals the total direct labor costs accumulated on the three jobs less the amount of direct labor cost assigned to Job 102 in May:

Job 102 .................................................................$14,000Less prior costs................................................... (3,600 ) $ 10,400Job 103 ................................................................. 26,700Job 104 ................................................................. 40,000 Total direct labor.................................................. $ 77,100

3. The predetermined overhead rate equals the ratio between the amount of overhead assigned to the jobs divided by the amount of direct labor cost assigned to them. Since it’s assumed the rate is constant across months in this exercise, and the same rate is used for all jobs within a period, the ratio for any one of them equals the rate that was applied. This table shows the ratio for jobs 102 and 104:

Job 102 Job 104Overhead...............................................................$ 7,000 $20,000Direct labor........................................................... 14,000 40,000Ratio...................................................................... 50% 50%



Exercise 19-2 (Continued)

4. The cost transferred to finished goods in June equals the total costs of the two completed jobs for the month, which are Jobs 102 and 103:

Job 102 Job 103 TotalDirect materials................................ $ 25,000 $ 59,000 $ 84,000Direct labor....................................... 14,000 26,700 40,700Overhead........................................... 7,000 13,350 20,350 Total transferred cost...................... $ 46,000 $ 99,050 $145,050


1.

Rate = = = 150%

2.

Direct materials.................................................................................. $15,250Direct labor......................................................................................... 3,280Overhead ($3,280 x 150%)................................................................. 4,920 Total cost of Job No. 13-56............................................................... $23,450


1. Rate = = = 40%

2. Total cost of job in process (given)......................................................$ 90,000Less materials cost of job in process (given)...................................... (40,000)Less overhead applied (40,000 x 40%).................................................. (16,000 )Direct labor cost......................................................................................$ 34,000



Estimated overhead costsEstimated direct labor

Overhead costsDirect material costs

$750,000$500,000

$480,000$1,200,000


1. Cost of direct materials usedBeginning raw materials inventory...................................................$ 27,000Plus purchases................................................................................... 183,000 Raw materials available.....................................................................210,000Less ending raw materials inventory............................................... (41,000 )Total raw materials used...................................................................169,000 Less indirect materials used............................................................. (6,000 )Cost of direct materials used............................................................$ 163,000

2. Cost of direct labor usedTotal factory payroll...........................................................................$ 500,000Less indirect labor............................................................................. (74,000 )Cost of direct labor used...................................................................$ 426,000

3. Cost of goods manufacturedBeginning goods in process inventory............................................$ 9,000Plus direct materials.......................................................................... 163,000Plus direct labor................................................................................. 426,000Plus overhead applied (55% of DLC)................................................ 234,300 Total cost of goods in process.........................................................832,300Less ending goods in process inventory........................................ (20,600 )Cost of goods manufactured............................................................$ 811,700

4. Cost of goods soldBeginning finished goods inventory................................................$ 70,000Plus cost of goods manufactured....................................................811,700Less ending finished goods inventory............................................ (33,000 )Cost of goods sold.............................................................................$ 848,700

5. Gross profitSales....................................................................................................$1,500,000Cost of goods sold............................................................................. (848,700 )Gross profit.........................................................................................$ 651,300

6. Overapplied or underapplied overheadIndirect materials................................................................................$ 6,000Indirect labor.......................................................................................74,000Other overhead costs........................................................................ 95,500 Total actual overhead incurred.........................................................175,500Overhead applied............................................................................... 234,300 Overapplied overhead........................................................................$ 58,800




1. Raw Materials Inventory................................................183,000 Cash........................................................................... 183,000 To record materials purchases.

2. Goods in Process Inventory..........................................163,000 Raw Materials Inventory.......................................... 163,000 To assign direct materials to jobs.

3. Factory Overhead...........................................................6,000 Raw Materials Inventory.......................................... 6,000

To record indirect materials.

4. Factory Payroll...............................................................500,000 Cash........................................................................... 500,000 To record factory payroll.

5. Goods in Process Inventory..........................................426,000 Factory Payroll......................................................... 426,000 To assign direct labor to jobs.

6. Factory Overhead...........................................................74,000 Factory Payroll......................................................... 74,000 To record indirect labor.

7. Factory Overhead...........................................................95,500 Other Accounts........................................................ 95,500

To record other factory overhead.

8. Goods in Process Inventory..........................................234,300 Factory Overhead..................................................... 234,300 To apply overhead to jobs.

9. Finished Goods Inventory.............................................811,700 Goods in Process Inventory.................................... 811,700 To record completion of jobs.

10. Cost of Goods Sold........................................................848,700 Finished Goods Inventory....................................... 848,700 To record cost of sales of jobs.

Cash.................................................................................1,500,000 Sales.......................................................................... 1,500,000 To record sale of jobs.



11. Factory Overhead...........................................................58,800 Cost of Goods Sold.................................................. 58,800

To allocate (close) overapplied overhead to cost of goods sold.




1. Predetermined overhead rateEstimated overhead costs.............................................................$1,700,000

Estimated direct labor costs.........................................................$ 500,000

Rate ($1,700,000 / $500,000).......................................................... 340%

2. & 3.

Overhead

Incurred.........................1,710,000 Applied*.................................................................1,666,000

Underapplied 44,000

*Overhead applied to jobs = 340% x $490,000 = $1,666,000

4.Dec. 31 Cost of Goods Sold........................................................44,000

Factory Overhead..................................................... 44,000 To allocate underapplied overhead.




1. Predetermined overhead rateEstimated overhead costs..............................................................$1,500,000

Estimated direct labor costs...........................................................$1,250,000

Rate ($1,500,000 / $1,250,000).........................................................120%

2. & 3.

Factory Overhead

Incurred.........................1,660,000 Applied*.................................................................1,644,000

Underapplied................16,000

*Overhead applied to jobs = 120% x $1,370,000 = $1,644,000

4. Dec. 31 Cost of Goods Sold........................................................16,000

Factory Overhead..................................................... 16,000 To allocate underapplied overhead.




1. Overhead rate = Total overhead costs applied / Total direct labor costs = $1,200,000 / $2,000,000 = 60%

2.Total cost of goods in process inventory.............................. $ 54,000Deduct: Direct labor................................................................. (13,000)Deduct: Factory overhead ($13,000 x 60%)........................... ( 7,800 )Direct materials........................................................................ $ 33,200

3.Total cost of finished goods inventory.................................. $337,435Deduct: Direct materials......................................................... (137,435 )Direct labor and factory overhead costs............................... $200,000

We also know that the total of direct labor costs (X) and factory overhead costs (0.6X) equals $200,000. Thus, to get the individual amounts we need to solve: [X + 0.6X = $200,000]. The solution is:

Direct labor costs = $125,000

Factory overhead costs = $125,000 x .6 = $75,000




1. Overhead rate = Total estimated overhead cost_Total estimated direct labor cost

= $750,000 / $600,000 = 125%

2. Cost of the two ending inventories

Goods in Process Finished GoodsCost

per Unit UnitsTotalCost

Cost per Unit Units

Total Cost

Direct materials............$20.00 10,000 $200,000 $24.00 12,000 $288,000

Direct labor...................14.00 10,000 140,000 18.00 12,000 216,000

Overhead (125% of labor)....................... 17.50 10,000 175,000 22.50 12,000 270,000

Total...............................$51.50 $515,000 $64.50 $774,000

3.Step 1Cost of goods manufactured

Direct materials cost..........................................................................$1,070,000Direct labor cost................................................................................. 580,000Factory overhead cost applied......................................................... 725,000 Total manufacturing costs................................................................2,375,000Add beginning goods in process..................................................... 0 Total cost of goods in process.........................................................2,375,000Less ending goods in process......................................................... (515,000 )Cost of goods manufactured............................................................$1,860,000

Step 2Cost of goods sold

Beginning finished goods.................................................................$ 0Add cost of goods manufactured..................................................... 1,860,000 Goods available for sale 1,860,000Less ending finished goods.............................................................. (774,000 )Cost of goods sold.............................................................................$1,086,000




1. Estimated cost of the architectural job

Labor typeEstimated

hours Hourly rate Total costArchitects..........................................300 $400 $ 120,000Staff...................................................300 65 19,500Clerical..............................................600 20 12,000

Total labor cost......................................................................... 151,500Overhead @ 160% of direct labor cost................................... 242,400 Total estimated cost.................................................................$ 393,900

2. Troy should first determine an estimated selling price, based on its cost and desired profit for this job

Total estimated cost.................................................................$ 393,900 Desired profit........................................................................... 90,000 Estimated selling price...........................................................$ 483,900

This $483,900 price may or may not be the bid. Troy must consider past experiences and competition. It might make the bid at the low end of what it believes the competition will bid. By bidding at about $450,000, the profit on the job will only be $56,100 ($450,000 – $393,900). While this may allow Troy to get the job, it must consider several other factors. Among them:

a. How accurate are its estimates of costs? If costs are understated, the bid may be too low. This will cause profits to be lower than anticipated. If costs are overestimated, it may bid too high and lose the job.

b. How accurate is the estimate of the competition’s probable bidding range? If it has underestimated the low end, it may be unnecessarily underbidding. If it has overestimated the low end, it may lose the job.

c. Is it willing to meet the expected low bid of the competition? In the example above, would it be acceptable to earn only $56,100 on this job (about a 12% gross profit ratio), rather than the normal $90,000 (20% gross profit ratio)? Can it earn a better profit on another job?

There is no exact answer to these questions, but Troy must consider these and other factors before it submits the bid.



PROBLEM SET A

Problem 19-1A (80 minutes)

Part 1

Total manufacturing costs and the costs assigned to each job

306 307 308 April TotalFrom MarchDirect materials......................$ 9,000 $ 17,000Direct labor............................. 19,000 5,000Applied overhead*.................. 12,350 3,250 Beginning goods in process........................... 40,350 25,250 $ 65,600

For AprilDirect materials...................... 75,000 160,000 $ 65,000 300,000Direct labor ............................ 31,000 74,000 100,000 205,000Applied overhead*.................. 20,150 48,100 65,000 133,250 Total costs added in April................................. 126,150 282,100 230,000 638,250 Total costs..............................$166,500 $307,350 $230,000 $703,850

*Equals 65% of direct labor cost.

Part 2

Journal entries for April

a. Raw Materials Inventory................................................310,000 Accounts Payable.................................................... 310,000 To record materials purchases.

Factory Payroll...............................................................224,000 Cash........................................................................... 224,000 To record factory payroll.

Factory Overhead...........................................................25,000 Raw Materials Inventory.......................................... 25,000 To record indirect materials.

Factory Overhead...........................................................19,000 Factory Payroll......................................................... 19,000 To record indirect labor.



Problem 19-1A (Continued)a. [continued from prior page]

Factory Overhead...........................................................25,000 Cash........................................................................... 25,000 To record factory rent.

Factory Overhead...........................................................13,000 Cash........................................................................... 13,000 To record factory utilities.

Factory Overhead...........................................................41,000 Accumulated Depreciation—Factory Equip.......... 41,000 To record other factory overhead.

b. Goods in Process Inventory..........................................300,000 Raw Materials Inventory.......................................... 300,000 To assign direct materials to jobs.

Goods in Process Inventory..........................................205,000 Factory Payroll......................................................... 205,000 To assign direct labor to jobs.

Goods in Process Inventory..........................................133,250 Factory Overhead..................................................... 133,250 To apply overhead to jobs.

c. Finished Goods Inventory (306 & 307)..........................473,850 Goods in Process Inventory.................................... 473,850 To record jobs completed ($166,500 + $307,350).

d. Cost of Goods Sold (306)...............................................166,500 Finished Goods Inventory....................................... 166,500 To record cost of sale of job.

e. Cash.................................................................................400,000 Sales.......................................................................... 400,000 To record sale of job.

f. Factory Overhead*.........................................................10,250 Cost of Goods Sold.................................................. 10,250 To assign overapplied overhead.

*Overhead applied to jobs................ $133,250Overhead incurredIndirect materials..................................$25,000



Indirect labor......................................... 19,000Factory rent........................................... 25,000Factory utilities..................................... 13,000Factory equip. depreciation................. 41,000 123,000 Overapplied overhead.......................... $ 10,250



Problem 19-1A (Continued)Part 3

LEMMON COMPANYManufacturing StatementFor Month Ended April 30

Direct materials used.................................................................. $ 300,000Direct labor used......................................................................... 205,000Factory overhead Indirect materials......................................................................$25,000 Indirect labor............................................................................19,000 Factory rent..............................................................................25,000 Factory utilities.........................................................................13,000 Depreciation of equipment...................................................... 41,000 123,000 Total manufacturing costs......................................................... 628,000Add goods in process, March 31 (306 & 307)........................... 65,600 Total cost of goods in process.................................................. 693,600Deduct goods in process, April 30 (308)................................... (230,000)Add overapplied overhead*........................................................ 10,250 Cost of goods manufactured (306 & 307).................................. $ 473,850

*Alternatively, overapplied overhead can be listed among factory overhead items.

Part 4

Gross profit on the income statement for the month ended April 30

Sales.......................................................................................................... $ 400,000Cost of goods sold ($166,500 - $10,250)................................................. (156,250 )Gross profit............................................................................................... $ 243,750

Presentation of inventories on the April 30 balance sheet

InventoriesRaw materials .......................................................................................... $ 155,000*Goods in process (Job 308).................................................................... 230,000Finished goods (Job 307)........................................................................ 307,350 Total inventories ..................................................................................... $ 692,350

* Beginning raw materials inventory........................................................$ 170,000 Purchases................................................................................................310,000 Direct materials used..............................................................................(300,000) Indirect materials used........................................................................... (25,000 ) Ending raw materials inventory.............................................................$ 155,000

Part 5

Overhead is overapplied by $10,250, meaning that individual jobs or batches of jobs are over-costed. Thus, profits at the job (and batch) level are understated.




Part 1

a.Dec. 31 Goods in Process Inventory..........................................11,200

Raw Materials Inventory.......................................... 11,200 To record direct materials costs for Jobs 402 and 404 ($4,100 + 7,100).

b.Dec. 31 Goods in Process Inventory..........................................17,000

Factory Payroll......................................................... 17,000 To record direct labor costs for Jobs 402 and 404 ($2,000 + $15,000).

c.Dec. 31 Goods in Process Inventory..........................................25,500

Factory Overhead..................................................... 25,500 To allocate overhead to Jobs 402 and 404 at 150% of direct labor cost assigned.

d.Dec. 31 Factory Overhead...........................................................2,400

Raw Materials Inventory.......................................... 2,400 To add cost of indirect materials to actual factory overhead.

e.Dec. 31 Factory Overhead...........................................................1,000

Factory Payroll......................................................... 1,000 To add cost of indirect labor to actual factory overhead.

Part 2

Revised Factory Overhead accountEnding balance from trial balance.............................................$ 26,000 debitApplied to Jobs 402 and 404...................................................... (25,500) creditAdditional indirect materials...................................................... 2,400 debitAdditional indirect labor............................................................. 1,000 debitUnderapplied overhead...............................................................$ 3,900 debit

Dec. 31 Cost of Goods Sold........................................................3,900 Factory Overhead..................................................... 3,900 To remove $3,900 of underapplied overhead from the Factory Overhead account and add



it to cost of goods sold.



Problem 19-2A (Continued)

Part 3

MEAD BAY COMPANYTrial Balance

December 31, 2009Debit Credit

Cash ...................................................................................$ 40,000Accounts receivable.......................................................... 34,000Raw materials inventory *................................................. 8,400Goods in process inventory **......................................... 53,700Finished goods inventory ................................................ 12,000Prepaid rent ....................................................................... 4,000Accounts payable ............................................................. $ 8,500Notes payable .................................................................... 11,500Common stock .................................................................. 40,000Retained earnings ............................................................. 84,000Sales ................................................................................... 178,000Cost of goods sold ($112,000 + $3,900)................................ 115,900Factory payroll................................................................... 0Factory overhead............................................................... 0Operating expenses.......................................................... 54,000 _______Totals..................................................................................$322,000 $322,000

* Raw materials inventoryBalance per trial balance......................................................................$22,000Less: Amounts recorded for Jobs 402 and 404................................(11,200)Less: Indirect materials....................................................................... (2,400 )Ending balance.....................................................................................$ 8,400

** Goods in process inventory Job 402 Job 404 Total

Direct materials.................. $ 4,100 $ 7,100 $11,200Direct labor......................... 2,000 15,000 17,000Overhead............................ 3,000 22,500 25,500 Total cost............................ $ 9,100 $44,600 $53,700




Part 4

MEAD BAY COMPANYIncome Statement

For Year Ended December 31, 2009Sales................................................................................................$178,000Cost of goods sold......................................................................... (115,900 )Gross profit..................................................................................... 62,100Operating expenses....................................................................... (54,000 )Net income......................................................................................$ 8,100

MEAD BAY COMPANY Balance Sheet

December 31, 2009AssetsCash....................................................................................... $ 40,000Accounts receivable............................................................ 34,000Inventories Raw materials inventory.....................................................$ 8,400 Goods in process inventory...............................................53,700 Finished goods inventory................................................... 12,000 74,100Prepaid rent.......................................................................... 4,000 Total assets........................................................................... $152,100

Liabilities and EquityAccounts payable................................................................. $ 8,500Notes payable....................................................................... 11,500 Total liabilities...................................................................... 20,000

Common stock..................................................................... 40,000Retained earnings ($84,000 + $8,100)................................... 92,100 Total stockholders' equity................................................... 132,100

Total liabilities and equity................................................... $152,100

Part 5

This $2,400 error would cause the costs for Job 404 to be understated. Since Job 404 is in process at the end of the period, goods in process inventory and total assets would both be understated on the balance sheet. In addition, the over- or underapplied overhead would change by $2,400. That is, if overhead is underapplied by, say, $3,900, this amount would decrease by $2,400 when the error is corrected. Since underapplied overhead is charged directly to cost of



goods sold, then cost of goods sold would decrease by $2,400 and net income would increase by $2,400—yielding a $2,400 increase in retained earnings on the balance sheet.




Part 1

JOB COST SHEETS

Job No. 136 Job No. 138Materials.............. $ 50,000 Materials.............. $ 19,800Labor................... 12,100 Labor................... 37,500Overhead............. 24,200 Overhead............. 75,000 Total cost............ $ 86,300 Total cost............ $132,300

Job No. 137 Job No. 139Materials.............. $ 33,000 Materials.............. $ 22,600Labor................... 10,800 Labor................... 39,400Overhead............. 21,600 Overhead............. 78,800 Total cost............ $ 65,400 Total cost............ $140,800

Job No. 140Materials.............. $ 6,800Labor................... 3,200Overhead............. 6,400 Total cost............ $ 16,400

Part 2

a. Raw Materials Inventory................................................200,000 Accounts Payable.................................................... 200,000 To record materials purchases.

b. Factory Payroll...............................................................130,000 Cash........................................................................... 130,000 To record factory payroll.

c. Factory Overhead...........................................................16,000 Cash........................................................................... 16,000 To record other factory overhead.

d. Goods in Process Inventory..........................................132,200Factory Overhead...........................................................20,000 Raw Materials Inventory.......................................... 152,200 To record direct & indirect materials.




e. [continued from prior page]

Goods in Process Inventory..........................................103,000Factory Overhead...........................................................27,000 Factory Payroll......................................................... 130,000 To record direct & indirect labor.

f. Goods in Process Inventory..........................................178,000 Factory Overhead..................................................... 178,000 To apply overhead to jobs [($12,100 + $37,500 + $39,400) x 200%].

g. Finished Goods Inventory.............................................359,400 Goods in Process Inventory.................................... 359,400 To record completion of jobs ($86,300 + $132,300 + $140,800).

h. Accounts Receivable.....................................................550,000 Sales.......................................................................... 550,000 To record sales on account.

Cost of Goods Sold........................................................218,600 Finished Goods Inventory....................................... 218,600 To record cost of sales ($86,300 + $132,300).

i. Factory Overhead...........................................................152,000 Accum. Depreciation—Factory Building............... 68,500 Accum. Depreciation—Factory Equipment........... 37,500 Prepaid Insurance.................................................... 11,000 Property Taxes Payable........................................... 35,000 To record other factory overhead.

j. Goods in Process Inventory..........................................28,000 Factory Overhead..................................................... 28,000 To apply overhead to jobs [($10,800 + $3,200) x 200%].




Part 3

GENERAL LEDGER ACCOUNTS

Raw Materials Inventory Factory Payroll(a) 200,000 (d) 152,200 (b) 130,000 (e) 130,000Bal. 47,800 Bal. 0

Goods in Process Inventory Factory Overhead(d) 132,200 (g) 359,400 (c) 16,000 (f) 178,000(e) 103,000 (d) 20,000 (j) 28,000(f) 178,000 (e) 27,000(j) 28,000 (i) 152,000Bal. 81,800 Bal. 9,000

Finished Goods Inventory Cost of Goods Sold(g) 359,400 (h) 218,600 (h) 218,600Bal. 140,800 Bal. 218,600

Part 4

Reports of Job Costs*Goods in Process Inventory Job 137......................................... $ 65,400 Job 140......................................... 16,400 Balance......................................... $ 81,800

Finished Goods Inventory Job 139......................................... $140,800 Balance......................................... $140,800

Cost of Goods Sold Job 136......................................... $ 86,300 Job 138......................................... 132,300 Balance......................................... $218,600

*Individual totals reconcile with account balances in part 3.




Part 1

a. Predetermined overhead rate

= = = 60%

b. Overhead costs charged to jobs

Direct AppliedJob No. Labor Overhead (60%)

201.........................................................................$ 604,000 $ 362,400

202......................................................................... 573,000 343,800

203......................................................................... 318,000 190,800

204......................................................................... 726,000 435,600

205......................................................................... 324,000 194,400

206......................................................................... 27,000 16,200

Total.......................................................................$2,572,000 $1,543,200

c. Overapplied or underapplied overhead determination

Actual overhead cost...........................................$1,554,900Less applied overhead cost................................ 1,543,200 Underapplied overhead.......................................$ 11,700

Part 2

Dec. 31 Cost of Goods Sold........................................................11,700 Factory Overhead..................................................... 11,700 To assign underapplied overhead.



Estimated overhead costsEstimated direct labor cost

$1,800,000[50 x 2,000 x $30]

$1,800,000$3,000,000


JOB COST SHEET

Customer's Name Global Company Job No. 102

Direct Materials Direct Labor Overhead Costs Applied

DateRequisition

Number Amount

Time Ticket

Number Amount Date Rate Amount#35 16,875 #1-10 45,000 May --- 80% 36,000#36 6,480

SUMMARY OF COSTSDir. Materials...........................................................................................................23,355Dir. Labor................................................................................................................45,000Overhead................................................................................................................. 36,000 Total cost of Job....................................................................................................104,355

Total 23,355 Total 45,000FF I N I S H E DI N I S H E D

JOB COST SHEET

Customer's Name Kaddo Company Job No. 103

Direct Materials Direct Labor Overhead Costs Applied

DateRequisition

Number Amount

Time Ticket

Number Amount Date Rate Amount#37 8,750 #11-30 32,500 May --- 80% 26,000#38 3,420

SUMMARY OF COSTSDir. Materials...........................................................................................................Dir. Labor................................................................................................................Overhead.................................................................................................................______Total cost of Job.................................................................................................... .

Total Total




MATERIALS LEDGER CARD

Item Material M

Received Issued Balance

DateReceiving Report Units

Unit Price

Total Price

Requi-sition Units

Unit Price

Total Price Units

Unit Price

Total Price

May 1

200 125 25,000

#426 250 125 31,250

450 125 56,250

#35 135 125 16,875

315 125 39,375

#37 70 125 8,750 245 125 30,625


Item Material R



Unit Price

Total Price

Requi-sition Units

Unit Price

Total Price Units

Unit Price

Total Price

May 1

95 90 8,550

#427 90 90 8,100 185 90 16,650#36 72 90 6,480 113 90 10,170#38 38 90 3,420 75 90 6,750


Item Paint



Unit Price

Total Price

Requi-sition Units

Unit Price

Total Price Units

Unit Price

Total Price

May 1

55 40 2,200

#39 15 40 600 40 40 1,60



0




GENERAL JOURNAL

a. Raw Materials Inventory................................................39,350 Accounts Payable.................................................... 39,350 To record materials purchases ($31,250 + $8,100).

d. Factory Payroll...............................................................87,125 Cash........................................................................... 87,125 To record factory payroll.

Factory Overhead...........................................................51,000 Cash........................................................................... 51,000 To record other factory overhead.

e. Finished Goods Inventory.............................................104,355 Goods in Process..................................................... 104,355 To record completion of job.

f. Accounts Receivable.....................................................200,000 Sales.......................................................................... 200,000 To record sales on account.

Cost of Goods Sold........................................................104,355 Finished Goods Inventory....................................... 104,355 To record cost of sales.

h. Goods in Process Inventory*........................................35,525Factory Overhead........................................................... 600 Raw Materials Inventory.......................................... 36,125 To record direct & indirect materials. *($16,875 + $6,480 + $8,750 + $3,420)

i. Goods in Process Inventory*........................................77,500Factory Overhead........................................................... 9,625 Factory Payroll......................................................... 87,125 To record direct & indirect labor. *($45,000 + 32,500)

j. Goods in Process Inventory..........................................62,000 Factory Overhead..................................................... 62,000 To apply overhead ($36,000 + 26,000).




GENERAL LEDGER

Cash Accounts Receivable(d) 87,125 (f) 200,000(d) 51,000

138,125

Sales Cost of Goods Sold

(f) 200,000 (f) 104,355

Finished Goods Inventory Accounts Payable(e) 104,355 (f) 104,355 (a) 39,350

0

Raw Materials Inventory Goods in Process InventoryBal. 35,750 (h) 36,125 (h) 35,525 (e) 104,355(a) 39,350 (i) 77,500

38,975 (j) 62,00070,670

Factory Overhead Factory Payroll(d) 51,000 (j) 62,000 (d) 87,125 (i) 87,125(h) 600 0(i) 9,625

775

Factory Overhead Subsidiary Ledger

Indirect Materials Indirect Labor(b) 600 (c) 9,625

Miscellaneous Overhead(d) 51,000




Computation notes1. Balance in Raw Materials Inventory

Material M.....................................................$ 30,625Material R..................................................... 6,750Paint ............................................................. 1,600 Total raw materials......................................$ 38,975

2. Balance in Goods in Process InventoryMaterials.......................................................$ 12,170Labor............................................................32,500Overhead...................................................... 26,000 Total goods in process...............................$ 70,670

3. Factory OverheadActual Factory Overhead Miscellaneous overhead..........................$ 51,000 Indirect materials..................................... 600 Indirect labor............................................ 9,625 Total actual factory overhead.................61,225Factory overhead applied........................... 62,000 Overapplied overhead................................$ 775



Ch19FAP19e

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