test bank chapter 3 job order costing

Sawyer Manufacturing Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs.. Last year, the company worked 57,000 actual direct l

Job-order costing would be more likely to be used than process costing

in situations where many different products or services are produced each period to customer specifications

When completed goods are sold the transaction is recorded as a debit

to Cost of Goods Sold and a credit to Work in Process

10 The most common accounting treatment of underapplied manufacturing

Easy

Work in Process is a control account supported by detailed cost data contained in:

a job cost sheets

b the Manufacturing Overhead account

c the Finished Goods inventory account

c labor cost that can be traced to a job only with a great deal

of effort is treated as part of manufacturing overhead

d a machine operator performing routine annual maintenance work

on a piece of equipment would charge the maintenance time to a specific job

a a credit to the Manufacturing Overhead account

b a credit to the Work in Process inventory account

c a debit to Cost of Goods Sold

d a debit to the Manufacturing Overhead account

a Work in Process inventory.

b Finished Goods inventory

b Finished Goods inventory

c Direct Labor Expense

at the end of any period means that:

a more overhead cost has been charged to jobs than has been incurred during the period

b more overhead cost has been incurred during the period than has been charged to jobs

c the amount of overhead cost charged to jobs is greater than the estimated cost for the period

d the amount of overhead cost charged to jobs is less than the estimated overhead cost for the period

a is deducted on the Income Statement as overapplied overhead.

b is closed to Cost of Goods Sold

c is transferred to Finished Goods at the end of the period

d is part of the ending balance of the Work in Process inventory account

26

B

Hard

The Work in Process inventory account of a manufacturing company shows

a balance of P2,400 at the end of an accounting period The job cost sheets of the two uncompleted jobs show charges of P400 and P200 for direct materials, and charges of P300 and P500 for direct labor From this information, it appears that the company is using a predeterminedoverhead rate, as a percentage of direct labor costs, of:

a P10,000 underapplied

b P10,000 overapplied

c P50,000 underapplied

d P50,000 overapplied

a 19,500 hours

b 18,000 hours

c 18,750 hours

d 17,750 hours30

at 100,000 hours Actual manufacturing overhead costs incurred during the year totaled P270,000 Actual direct labor hours were 105,000 What was the overapplied or underapplied overhead for the year?

Sawyer Manufacturing Company uses a predetermined overhead rate based

on direct labor hours to apply manufacturing overhead to jobs Last year, the company worked 57,000 actual direct labor hours and incurredP345,000 of actual manufacturing overhead cost The Company had estimated that it would work 55,000 direct labor hours during the yearand incur P330,000 of manufacturing overhead cost The company's manufacturing overhead cost for the year was:

Dept A Dept B Direct labor cost P30,000 P40,000 Manufacturing overhead 60,000 50,000 Direct labor hours 6,000 8,000 Machine hours 2,000 10,000What predetermined overhead rates would be used in Dept A and Dept B, respectively?

a 50% and P8.00

b 50% and P5.00

c P15 and 110%

d 200% and P5.00

C

Easy

Compton Company uses a predetermined overhead rate in applying overhead

to production orders on a labor cost basis in Department A and on a machine hours basis in Department B At the beginning of the most recently completed year, the company made the following estimates: Dept A Dept B

Direct labor cost P56,000 P33,000 Factory overhead 67,200 45,000 Direct labor hours 8,000 9,000 Machine hours 4,000 15,000What predetermined overhead rate would be used in Department A and Department B, respectively?

a 83% and P5

b 83% and P3

c 120% and P3

d 83% and P334

C

Medium

Kelsh Company uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to jobs The company has provided the following estimated costs for next year:

Direct materials P10,000 Direct labor 30,000 Sales commissions 40,000 Salary of production supervisor 20,000 Indirect materials 4,000 Advertising expense 8,000 Rent on factory equipment 10,000Kelsh estimates that 5,000 direct labor hours and 10,000 machine hourswill be worked during the year The predetermined overhead rate per hour will be:

a P6.80

b P6.40

c P3.40

d P8.20

be worked during the year If overhead is applied on the basis of machine hours, the overhead rate per hour will be:

CR Company estimates that 20,000 labor hours will be worked during the year If overhead is applied on the basis of direct labor hours, the overhead rate per hour will be:

a P6.50

b P6.00

c P5.70

d P5.50

March 1, balance P 12,000 March 31, direct materials 40,000 March 31, direct labor 30,000 March 31, manufacturing overhead applied 27,000 March 31, to finished goods (100,000)Worrell applies overhead at a predetermined rate of 90% of direct labor cost Job No 232, the only job still in process at the end of March, has been charged with manufacturing overhead of P2,250 What was the amount of direct materials charged to Job No 232?

a P2,250

b P2,500

c P4,250

d P9,000

475 P1,000 P 400 P 200

476 P 900 P 600 P 800

477 P 800 P 900 P1,400

478 P 600 P 1,100 P1,900Overhead is charged to production at 70% of the direct materials cost Jobs 475, 477, and 478 have been delivered to the customer

Samuelson’s Work in Process inventory balance on June 30 was:

Manufacturing Overhead account showed that overhead was underapplied

by P12,600 for the year If the predetermined overhead rate is P6.00 per direct labor hour, how many hours did the company work during the year?

a 26,000 hours

b 24,000 hours

c 28,200 hours

d 25,000 hours

Actual manufacturing overhead cost incurred P90,000 Actual direct labor hours worked 25,000The under- or overapplied overhead for the year would be:

C

Medium

Knowlton Company applies overhead to completed jobs on the basis of 70%

of direct labor cost If Job 501 shows P21,000 of manufacturing overheadapplied, the direct labor cost on the job was:

in raw materials (all direct material) If the sum of the debits to the Manufacturing Overhead account total P28,000 for the month, and ifthe sum of the credits totaled P30,000, then:

a Finished Goods was debited for P82,000 during the month

b Finished Goods was credited for P83,000 during the month

c Manufacturing Overhead was underapplied by P2,000 at the end of the month

d Finished Goods was debited for P85,000 during the month

Direct materials issued to production P 90,000 Indirect materials issued to production 8,000 Manufacturing overhead cost incurred 125,000 Manufacturing overhead cost applied 113,000 Direct labor cost incurred 107,000Lamprey Company had no beginning or ending inventories What was the cost of goods manufactured for January?

a P302,000

b P310,000

c P322,000

d P330,00048

A

Easy

Compute the amount of direct materials used during November if P20,000

in raw materials were purchased during the month and if the inventories were as follows:

Balance Balance November 1 November 30 Raw materials P 4,000 P 3,000 Work in process 12,000 15,000 Finished goods 24,000 27,000

a Manufacturing overhead was actually overapplied by P16,000 for the year

b The company's net income is understated by P6,000 for the year

c Under the circumstances posed above, the error in recording depreciation would have no effect on net income for the year

d The P6,000 in depreciation should have been charged to Work in Process rather than to administrative expense

Reference: 3-1

Wayne company uses a job costing system and applies overhead to jobs using a

predetermined overhead rate based on direct labor-hours The company had the

following inventories at the beginning and end of March:

March 1 March 31

Direct Materials P36,000 P30,000

Work in Process 18,000 12,000

Finished Goods 54,000 72,000

The following additional data pertain to operations during March:

Direct materials purchased P84,000

Direct labor cost P60,000

Direct labor rate P7.50 per direct labor-hour

Overhead rate P10.00 per direct labor-hour

 Job 101 was the only job in process at January 31 The job cost sheet for

this job contained the following costs at the beginning of the month:

Direct materials P4,000

Direct labor P2,000

Applied manufacturing overhead P3,000

 Jobs 102, 103, and 104 were started during February

 Direct materials requisitions for February totaled P26,000

 Direct labor cost of P20,000 was incurred for February

 Actual manufacturing overhead was P32,000 for February

 The only job still in process at February 28 was Job 104, with costs of

P2,800 for direct materials and P1,800 for direct labor

300 hours of direct labor time had been expended on the jobs in the beginning Work inProcess inventory account The ending Work in Process inventory account contained P4,700 of direct materials cost The Company incurred P28,000 of actual manufacturingoverhead cost during the month and applied P26,400 in manufacturing overhead cost.54.

B

Hard

Refer To:

3-3

The actual direct labor hours worked during November totaled:

a 2,800 hours

b 3,300 hours

c 3,500 hours

d 3,600 hours

57

C

Hard

Refer To:

3-3

The amount of direct labor cost in the November 30 Work in Process inventory was:

a P2,800

b P3,300

c P3,500

d P6,300

Reference: 3-4

The following T accounts are for Stanford Company:

Raw Materials Cost of Goods Sold

Beg Bal 7,000 | 24,000(2) |

(1)19,000 | |

| |

| |

| |

Sales Salaries Expense Work in Process

(4) 11,000 | Beg Bal 11,000 | ? (7)

| (2) 15,000 | | (4) 18,000 | | (6) 31,000 | | |

Accounts Payable Manufacturing Overhead

| 19,000 (1) (2) 9,000 | 31,000 (6) | 5,000 (5) (3) 16,000 | | (4) 8,000 | | (5) 5,000 | | |

Wages & Salaries Payable Finished Goods

| 7,000 Beg Bal Beg Bal 18,000 | | 37,000 (4) (7) 62,000 | | End Bal 15,000 | | |

Accumulated Depreciation— Factory

| 82,000 Beg Bal

| 16,000 (3)

During March, the following activity and amounts were recorded by the company:

Raw materials (all direct materials):

Purchased during the month P29,500

Used in production P30,500

Labor:

Direct labor hours worked during the month 2,500

Direct labor cost incurred P26,500

Indirect labor costs incurred P5,500

Manufacturing overhead costs incurred (total) P18,500

Inventories:

Raw materials (all direct) March 31 P7,500

Work in process, March 31 P14,500

Work in process inventory contains P5,500 of direct labor cost

a a debit of P50 to Cost of Goods Sold

b a debit of P50 to Manufacturing Overhead

c a debit of P5,500 to Manufacturing Overhead

d a credit of P5,500 to Cost of Goods Sold

Reference: 3-6

The Milo Company's records for May contained the following information:

Actual direct labor-hours 9,000 hours

Actual direct labor cost P 47,000

Direct material purchased 16,000

Direct material used 14,000

Cost of goods sold 100,000

Raw materials used in production P326,000

Total manufacturing costs charged to jobs during

the year (includes raw materials, direct labor, and

manufacturing overhead applied at the rate of 60 per

cent of direct labor cost) 686,000

Cost of goods available for sale 826,000

Selling and administrative expenses 25,000

Finished goods inventory P30,000 P40,000

Work in process inventory P20,000 P13,000

Raw materials inventory P21,000 P26,000

Purchases of raw materials P71,000

Added During September

September 1 Direct Direct

Job Number Inventory Materials Labor

The Cost of Goods Sold for September (before disposition of any

under-or overapplied overhead) is:

a P2,100

b P5,925

c P3,700

d P1,950

Reference: 3-10

The following journal entries without Peso data were taken from the accounting

records of Case Company Case company has a job-order costing system and applies overhead to jobs using a predetermined overhead rate

Cost of goods manufactured P515,000

Manufacturing overhead applied P150,000

Direct materials used P190,000

Actual manufacturing overhead P144,000

Under Summit's job-order costing system, any over or underapplied overhead is closed

to the Cost of Goods Sold account at the end of the calendar year (i.e., December 31)

* P1,500 ÷ P5.00/DLH = 300 DLH ** P50,000 ÷ 20,000 DLH = P2.50/DLH

b Actual overhead Cost P54,000 Overhead applied:

24,000 DLH x P2.50 60,000 Overapplied overhead (P 6,000)

Hard

Gilford, Inc., uses a job order costing system Costs going through the company's work in process account during June are given below Manufacturing overhead is applied to production using a predetermined overhead rate based on direct labor cost

Work in Process

_

Balance -0- | 95,000 Transferred out Direct materials 20,000 |

Direct labor 30,000 | Manufacturing Overhead 60,000 |

Balance 15,000 |Only Job 105 was still in process at the end of the month This job had been charged with P3,000 in direct materials cost

Required:

a Complete the following job order cost card for Job 105:

Direct materials P 3,000 Direct labor _

Manufacturing overhead _

Total cost at June 30 _

b Determine the total amount of materials cost charged to completed jobs during the month

Answer:

a Since only Job 105 was in process at the end of the month, all

of the P15,000 balance in the Work in Process account must apply

to it

Total cost in Work in Process (all Job 105) P15,000 Less materials cost in Job 105 3,000 Direct labor and manufacturing overhead cost P12,000 From the Work in Process T-account, it appears that

manufacturing overhead is being applied at 200% of direct labor cost

Let X = Direct labor cost

X + 2.00X = P12,000 3X = P12,000