(16 marks; suggested time 19 minutes)
Job Order Costing
Michelson Company is a manufacturing firm that uses job-order costing. The company's
inventory balances at the beginning of the year were as follows:
Work in process
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 33,000
machine hours and would incur $165,000 in variable and $66,000 in fixed manufacturing
overhead costs. The following transactions were recorded for the year:
a. Raw materials purchased: $315,000.
b. Raw materials requisitioned for use in production: $307,000 ($281,000 direct and
The following employee costs were incurred:
Direct labour: $377,000
Indirect labour: $96,000
Administrative salaries: $172,000
d. Selling costs: $147,000.
e. Factory utility costs: $10,000.
Depreciation for the year: $127,000, of which $120,000 is related to factory operations
and $7,000 is related to selling and administrative activities.
g. Manufacturing overhead was applied to jobs. 34,000 machine hours were used during
h. Sales for the year: $1,253,000.
The cost of goods manufactured: $914,000
The cost of goods sold: $913,000.
The balance in the Manufacturing Overhead account
was closed out to Cost of Goods Sold.
The Company has a December 31
fiscal year end.