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Exam 2: Job Order Costing and Analysis

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Question 21

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Cosi Company uses a job order costing system and allocates its overhead on the basis of direct labor costs. Cosi expects to incur $800,000 of overhead during the next period, and expects to use 50,000 labor hours at a cost of $10.00 per hour. What is Cosi Company's overhead application rate?

A) 6.25%.
B) 62.5%.
C) 160%.
D) 1600%.
E) 67%.

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Question 22

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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 $73,000 indirect labor for the month is:

A) Debit Supervisor Wage Expense; credit Factory Wages Payable.
B) Debit Factory Overhead; credit Factory Wages Payable.
C) Debit Supervisor Wage Expense; credit Factory Overhead.
D) Debit Factory Wages Payable; credit Factory Overhead.
E) Debit Factory Wage Expense; credit Cash.

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Question 23

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Predetermined overhead rates are calculated at the end of the accounting period once the actual amount of factory overhead is known.

Andrew Industries purchased $165,000 of raw materials on account during the month of March. The beginning Raw Materials Inventory balance was $22,000, and the materials used to complete jobs during the month were $141,000 of direct materials and $13,000 of indirect materials. What journal entry should Andrew use to account for direct materials used in March:

Direct materials and direct labor are examples of costs that are debited to the Factory Overhead account in a job costing system.

Cost accounting information is helpful to management for pricing decisions but has no effect on controlling costs.

Materials requisitions and time tickets are cost accounting source documents.

Describe the flow of the employee labor, both direct and indirect, through the inventory accounts.

Labor costs in production can be:

There should be a "cause and effect" relation between the overhead allocation base and overhead costs.

If overhead is overapplied, it means that individual jobs have been charged too much overhead during the year and the cost of goods sold reported is too high.

Material amounts of under- or overapplied factory overhead are always closed entirely to Cost of Goods Sold at the end of an accounting period.

Southwick Company uses a job order costing system. On November 1, $15,000 of direct materials and $3,500 of indirect materials were requisitioned for production. Prepare the general journal entries to record this requisition.

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

KL Company uses a job order costing system. During the month of July, the following events occurred: (a) Purchased raw materials on credit, $32,000. (b) Raw materials requisitioned: $25,800 as direct materials and $10,500 indirect materials. (c) Assigned the factory payroll totaling $37,700, which includes $8,200 indirect labor, to jobs and overhead. Make the necessary journal entries to record the above transactions and events.

Using the following accounts and an overhead rate of 90% of direct labor cost, determine the amount of applied overhead.

Mango Company applies overhead based on direct labor costs. For the current year, Mango Company estimated total overhead costs to be $300,000, and direct labor costs to be $150,000. Actual overhead costs for the year totaled $330,000, and actual direct labor costs totaled $170,000. At year-end, Factory Overhead account is:

Andrew Industries purchased $165,000 of raw materials on account during the month of March. The beginning Raw Materials Inventory balance was $22,000, and the materials used to complete jobs during the month were $141,000 direct materials and $13,000 indirect materials. How should Andrews journalize the purchase of raw materials for March?

Portside Watercraft uses a job order costing system. During one month Portside purchased $153,000 of raw materials on credit; issued materials to production of $164,000 of which $24,000 were indirect. Portside incurred a factory payroll of $95,000, of which $25,000 was indirect labor. Portside uses a predetermined overhead rate of 170% of direct labor cost. The journal entry to record the application of factory overhead to production is:

Explain how a service firm, such as an advertising agency, might use job order costing.