Chapter 16 Sample problems I and II-1.doc - Accounting 2120...

Accounting 2120
Chapter 16 – Job Order Costing
I. Sample Problems – Part I
A. Costs incurred (Accumulating Costs)
1. Purchased raw materials on account, $15,500
2. Incurred manufacturing overhead costs: rent on factory, $5000 (paid): utilities, $1800; insurance,
$650 (pre-paid)
Date Account Ref. Debit
Credit
1 Materials inventory 15,500
Accounts payable 15,500
2 Factory overhead 7,450
cash 5000
Utilities payable 1800
Prepaid insurance 650
B. Determining Overhead Rate
Estimated annual overhead costs: $195,000
Estimated annual direct labor costs: $243,750
Estimates overhead / estimated activity base; 195,000 / 243,750 = .8 or 80 %
We will apply overhead at 80%
Pre- Determined overhead rate: _____80%____________

Accounting 2120
Chapter 16 – Job Order Costing
C. Assigning Costs into Process
1. Raw material used: $22,600 (15% was general factory use, the remainder was direct material)
22,600 x 15% = 3,390 (indirect material); 22,600- 3390 = 19,120 (direct material)
2. Factory labor: $46,000 used (22% was general factory labor, the remainder was direct labor)
46,000 x 22% = 10,120 (indirect labor); 46000 - 10,120 =35,880 (direct labor)
3. Manufacturing Overhead applied: Based on actual direct labor costs (#2) and pre-determined
rate (part B)
Actual direct labor: 35,880 x 80% = 28,704
Date Account Ref.