Job Order Costing

# 2 2 7 test bank for managerial accounting second

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Test Bank for Managerial Accounting, Second Edition Ex. 122 (cont.) Instructions Answer the following questions: 1. What are the total of the debits to Work in Process Inventory during the year? 2. What is the amount transferred to Finished Goods Inventory during the year? 3. What is the cost of goods sold? Solution 122 (10–14 min.) 1. Direct Materials \$ 350,000 Direct Labor 160,000 Manufacturing Overhead Applied (\$160,000 × 150%) 240,000 Total debits \$750,000 2. WORK IN PROCESS INVENTORY Balance 50,000 Transferred to From (1) 750,000 Finished Goods 780,000 Balance 20,000 3. FINISHED GOODS INVENTORY Balance 140,000 Cost of Goods Sold 800,000 From WIP (see 2) 780,000 Balance 120,000 Ex. 123 Stoll Manufacturing, Inc. uses a job order costing system. The company uses predetermined overhead rates in applying manufacturing overhead to individual jobs. The predetermined overhead rate in Department X is based on direct labor hours, the rate in Department Y is based on machine hours, and the rate in Department Z is based on direct labor cost. At the beginning of the most recent year, members of Stoll's management team made the following estimates for the year: Department X Y Z Direct labor hours 80,000 26,000 60,000 Machine hours 50,000 85,000 23,000 Direct labor cost \$400,000 \$150,000 \$800,000 Direct materials \$200,000 \$ 26,000 \$ 42,000 Manufacturing overhead \$560,000 \$340,000 \$240,000 a. Compute the predetermined overhead rates for Departments X, Y, and Z. 2- 2 8
Job Order Cost Accounting Ex. 123 (cont.) b. Stoll Manufacturing's records show the following information for Job #6854, which was entered into production on January 17 and completed on March 7. Department X Y Z Direct labor hours 420 54 375 Machine hours 200 120 125 Direct labor cost \$2,400 \$1,080 \$1,390 Direct materials \$ 842 \$1,260 \$2,065 Compute the total manufacturing overhead applied to Job #6854. c. On December 31, Stoll showed the following actual costs and operating data for all jobs worked on during the year: Department X Y Z Direct labor hours 76,000 28,920 63,000 Machine hours 54,000 87,200 21,000 Direct labor cost \$395,200 \$138,000 \$815,000 Direct materials \$215,900 \$ 24,380 \$ 39,080 Manufacturing overhead \$540,000 \$345,000 \$254,000 Compute the amount of under- or overapplied overhead in each department at the end of the year and indicate whether it is under- or overapplied. Solution 123 (15–20 min.) a. Predetermined overhead rates for Departments X, Y, and Z: Department X — \$560,000 ÷ 80,000 direct labor hours = \$7 per direct labor hour Department Y — \$340,000 ÷ 85,000 machine hours = \$4 per machine hour Department Z — \$240,000 ÷ \$800,000 direct labor cost = 30% of direct labor cost b. Department X — 420 direct labor hours × \$7 per direct labor hour = \$2,940 Department Y— 120 machine hours × \$4 per machine hour = 480 Department Z — \$1,390 direct labor cost × 30% = 417 Total overhead applied to Job #6854 = \$3,837 c. Department X — 76,000 DLH × \$7 = \$532,000 compared to actual overhead \$540,000 – \$8,000 underapplied Department Y — 87,200 MH × \$4 = \$348,800 compared to actual overhead \$345,000 – \$3,800 overapplied Department Z — \$815,000 DLC × 30% = \$244,500 compared to actual overhead \$254,000 – \$9,500 underapplied 2- 2 9

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Test Bank for Managerial Accounting, Second Edition Ex. 124 Mr. J. G. Pigg, III is the sole owner of a brick company that manufactures custom bricks used in upscale homes. No two customers have the same type of bricks. The bricks go through three processes: mixing, shaping, and firing. The company uses a job order cost system and computes
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