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Exam 2: Job Order Costing and Analysis

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Question 1

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Minstrel Manufacturing uses a job order costing system. During one month, Minstrel purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, of which $40,000 was indirect labor. Minstrel uses a predetermined overhead rate of 150% of direct labor cost. The journal entry to record the purchase of materials is:

A) Debit Raw Materials Inventory $198,000; credit Accounts Payable $198,000.
B) Debit Work in Process Inventory $198,000; credit Accounts Payable $198,000.
C) Debit Raw Materials Inventory $198,000; credit Work in Process Inventory $198,000.
D) Debit Work in Process Inventory $195,000; credit Raw Materials Inventory $195,000.
E) Debit Raw Materials Inventory $198,000; credit Finished Goods Inventory $198,000.

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Question 2

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Juarez Builders incurred $285,000 of labor costs for construction jobs completed during the month of August, of which $212,000 was direct and $73,000 was indirect supervisory costs. The correct journal entry to record the direct labor for the month is:

A) Debit Payroll Expense $212,000; credit Cash $212,000.
B) Debit Factory Wages Payable $285,000; credit Work in Process Inventory $212,000.
C) Debit Work in Process Inventory $212,000; credit Cash $285,000.
D) Debit Work in Process Inventory $285,000; credit Factory Wages Payable $285,000.
E) Debit Work in Process Inventory $212,000; credit Factory Wages Payable $212,000.

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Question 3

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Predetermined overhead rates are necessary because cost accountants use periodic inventory systems.

Adams Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Adams estimated total overhead of $396,000; materials of $410,000 and direct labor of $220,000. During the year Adams incurred $418,000 in materials costs, $413,200 in overhead costs and $224,000 in direct labor costs. Compute the amount of overhead applied to jobs during the year.

Period costs for a manufacturing company, such as selling and administrative expenses, are recorded directly to Work In Process Inventory when they are incurred.

Franklin Manufacturing uses a job order costing system that charges overhead to jobs on the basis of direct labor cost. Franklin used the following cost predictions: overhead costs $1,285,750, and direct labor costs of $695,000. At year-end, the company's records show that actual overhead costs for the year are $1,278,800, and actual direct labor costs are $692,000. a. Determine the predetermined overhead rate for the year. b. Compute the amount of overapplied or underapplied overhead. c. Prepare the adjusting entry to allocate the over- or underapplied overhead assuming the amount is immaterial.

A job cost sheet includes:

What is a cost accounting system? What are the two basic types of cost accounting systems?

Large aircraft producers such as the Boeing Company normally use:

The target cost for a job using job costing is calculated as:

Minstrel Manufacturing uses a job order costing system. During one month Minstrel purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, of which $40,000 was indirect labor. Minstrel uses a predetermined overhead rate of 150% of direct labor cost. The journal entry to record the application of factory overhead to production is:

The B&T Company's production costs for May are: direct labor, $13,000; indirect labor, $6,500; direct materials, $15,000; property taxes on production facility, $800; factory heat, lights and power, $1,000; and insurance on plant and equipment, $200. B&T Company's factory overhead incurred for May is:

A time ticket is a source document used by an employee to record the total number of hours worked and serves as a source document for entries to record labor costs.

A source document that production managers use to request materials for production and that is used to assign materials costs to specific jobs or to overhead is a:

Adams Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Adams estimated total overhead of $396,000; materials of $410,000 and direct labor of $220,000. During the year Adams incurred $418,000 in materials costs, $413,200 in overhead costs and $224,000 in direct labor costs. Compute the amount of under- or overapplied overhead for the year.

If actual overhead incurred during a period exceeds applied overhead, the difference will be a debit balance in the Factory Overhead account at the end of the period.

CWN Company uses a job order costing system and last period incurred $80,000 of actual overhead and $100,000 of direct labor. CWN estimates that its overhead next period will be $75,000. It also expects to incur $100,000 of direct labor. If CWN bases applied overhead on direct labor cost, its predetermined overhead rate for the next period should be:

A manufacturing company uses an overhead rate based on direct labor cost. The company's Work in Process Inventory account has a $15,000 debit balance after all posting is completed, and the cost sheet of the one job still in process shows direct material costs of $6,600 and direct labor costs of $3,000. What is the company's overhead application rate?

Using the following accounts and an overhead rate of 130% of direct labor cost, compute the amount of applied overhead.

A company that produces products individually designed to meet the needs of a specific customer, would normally use a job order costing system.