Job Order Costing

# Factory labor bal 11000 2 80000 4 80000 8000

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Factory Labor Bal. 11,000 (2) 80,000 (4) 80,000 8,000 Manufacturing Overhead Cost of Goods Sold (3) 30,000 (5) 32,000 (c) 1. Raw materials used = \$17,000 + \$75,000 – \$19,000 = \$73,000. 2. Completed jobs transferred to finished goods = W/P debits \$9,000 + \$112,000 – \$14,000 = \$107,000. 3. Cost of goods sold = \$11,000 + \$107,000 – \$8,000 = \$110,000. 4. Overhead overapplied = \$2,000 (credit balance in Manufacturing Overhead). Ex. 120 Job cost sheets for Howard Manufacturing are as follows: Job No 210 Quantity 1,500 Manufacturing Date Direct Materials Direct Labor Overhead July 1 7,000 8,000 12,000 8 7,800 10 10,000 15 6,500 25 15,000 Job No 211 Quantity 1,200 Manufacturing Date Direct Materials Direct Labor Overhead July 1 4,000 6,000 9,000 10 9,000 15 8,000 20 7,000 27 12,000 2- 2 5

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Test Bank for Managerial Accounting, Second Edition Ex. 120 (cont.) Instructions (a) Answer the following questions: 1. What was the balance in Work in Process Inventory on July 1 if these were the only unfinished jobs? 2. What was the predetermined overhead rate in June if overhead was applied on the basis of direct labor cost? 3. If July is the start of a new fiscal year and the overhead rate is 20% higher than in the preceding year, how much overhead should be applied to Job 210 in July? 4. Assuming Job 210 is complete, what is the total and unit cost of the job? 5. Assuming Job 211 is the only unfinished job at July 31, what is the balance in Work in Process Inventory on this date? (b) Journalize the summary entries to record the assignment of costs to the jobs in July. ( Note: Make one entry in total for each manufacturing cost element.) Solution 120 (15–20 min.) (a) 1. Job 210 — \$7,000 + \$8,000 + \$12,000 = \$27,000 Job 211 — \$4,000 + \$6,000 + \$9,000 = 19,000 \$46,000 2. Manufacturing overhead rate = 150% of direct labor cost (\$12,000 ÷ \$8,000 or \$9,000 ÷ \$6,000) 3. July overhead rate = 150% × 120% = 180% Overhead applied in July = \$25,000 × 180% = \$45,000 4. Direct materials \$ 21,300 Direct labor 33,000 Manufacturing overhead (\$12,000 + \$45,000) 57,000 Total cost \$111,300 Unit cost (\$111,300 ÷ 1,500) \$74.20 5. Direct materials \$20,000 Direct labor 26,000 Manufacturing overhead (\$9,000 + \$36,000) 45,000 Total cost of work in process \$91,000 (b) Work in Process Inventory ............................................................. 30,300 Raw Materials Inventory ........................................................ 30,300 Work in Process Inventory ............................................................. 45,000 Factory Labor ........................................................................ 45,000 Work in Process Inventory ............................................................. 81,000 Manufacturing Overhead ....................................................... 81,000 2- 2 6
Job Order Cost Accounting Ex. 121 Garner Company begins operations on July 1, 2002. Information from job cost sheets shows the following: Manufacturing Costs Assigned Job No. July August September 100 \$12,000 \$8,800 101 7,800 9,700 \$12,000 102 5,000 103 11,800 6,000 104 5,800 7,000 Job 102 was completed in July. Job 100 was completed in August, and Jobs 101 and 103 were completed in September. Each job was sold for 60% above its cost in the month following completion. Instructions (a) Compute the balance in Work in Process Inventory at the end of July. (b) Compute the balance in Finished Goods Inventory at the end of September. (c) Compute the gross profit for August. Solution 121 (10–13 min.) (a) Work in Process Inventory July Job 100 \$12,000 Job 101 7,800 Balance, July 31 \$19,800 (b) Finished Goods Inventory Job 101 \$29,500 Job 103 17,800 Balance, Sept. 30 \$47,300 (c) Gross Profit Month Job Number Sales COGS Gross Profit August 102 \$8,000 \$5,000 \$3,000 Ex. 122 The accounting records of Roland Manufacturing Company include the following information: Dec. 31 Jan. 1 Work in process inventory \$ 20,000 \$ 50,000 Finished goods inventory 120,000 140,000 Direct materials used 350,000 Direct labor 160,000 Selling expenses 125,000 Manufacturing overhead is applied at a rate of 150% of direct labor cost.

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