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Exam 19: Job Order Cost Accounting

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Question 71

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The overhead allocation rate in Frantz Company's job order cost accounting system applies overhead based on direct labor costs. The company's manufacturing costs for the current year were: direct materials, $108,000; direct labor, $144,000; and factory overhead, $18,000. At year-end, the total cost of goods in process is $36,000, which includes $12,000 of direct labor cost. What amount of direct material cost is included in the ending goods in process inventory?

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Question 72

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At the current year-end, Hardly Company found that its overhead was underapplied by $2,500, and this amount was not deemed to be a material amount. Based on this information, Hardly should

A) Close the $2,500 to Cost of Goods Sold.
B) Close the $2,500 to Finished Goods Inventory.
C) Do nothing about the $2,500, since it is not material, and it is likely that overhead will be overapplied by the same amount next year.
D) Carry the $2,500 to the income statement as "Other Expense".
E) Carry the $2,500 to the next period.

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Question 73

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Hancock Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Hancock estimated total overhead of $396,000; materials of $410,000 and direct labor of $220,000. During the year Hancock 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.

In a job order cost accounting system, indirect labor costs are debited to the Factory Overhead account.

The file of job cost sheets for completed but undelivered jobs equals the balance in the Goods in Process Inventory account.

Describe the purpose of a job cost sheet, and explain what information is found on the job cost sheet.

The following information is available for the Millennium Corporation for the current year: Millennium Corporation uses a predetermined overhead rate of 150% of direct labor cost. Prepare journal entries for the following transactions and events: (a) Purchase of raw materials on account. (b) Assignment of materials costs to Goods in Process Inventory and Factory Overhead. (c) Payment of Factory Payroll in cash. (d) Assignment of Factory Payroll to Goods in Process Inventory and Factory Overhead. (e) Recording of other factory overhead. Assume that all items other than depreciation are paid in cash. (f) Assignment of Factory Overhead to Goods in Process Inventory. (g) Transfer of goods completed to Finished Goods Inventory. (h) Recording cost of goods sold. (i) Assignment of over- or underapplied overhead to Cost of Goods Sold.

Briefly describe how manufacturing firms dispose of overapplied or underapplied factory overhead.

Finished goods inventory is $190,000. If overhead applied to these goods is $72,000, and the overhead rate is 120% of direct labor, how much direct materials cost was incurred in producing the inventory?

A clock card 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.

O.K. Company uses a job order cost accounting system and allocates its overhead on the basis of direct labor costs. O.K. 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 O.K. Company's overhead application rate?

Estimated overhead and direct labor costs for the year were $112,500 and $125,000, respectively. During the year, actual overhead was $107,400 and actual direct labor cost was $120,000. The entry to close the over- or underapplied overhead at year-end, assuming an immaterial amount, would include:

Job cost sheets are used to track all of the costs assigned to a job, including direct materials, direct labor, overhead, and all selling and administrative costs.

Describe how materials flow through a job order cost accounting system, and identify the key documents in the system.

Job order production systems would be appropriate for companies that produce compact disks or disposable cameras.

The Goods in Process Inventory account of a manufacturing company that uses an overhead rate based on direct labor cost has a $4,400 debit balance after all posting is completed. The cost sheet of the one job still in process shows direct material cost of $2,000 and direct labor cost of $800. Therefore, the company's overhead application rate is:

A company's ending inventory of finished goods has a cost of $35,000 and consists of 750 units. If the overhead applicable to these goods is $8,400, and overhead is applied at the rate of 60% of direct labor, what is the cost of the direct materials used to produce these units?

In a job order cost accounting system, raw materials requisitioned as direct materials are debited to ________________________; indirect materials are debited to _________________.

Explain what a predetermined overhead allocation rate is, how it is calculated, and why it is used.

The Johnson Manufacturing Company has the following job cost sheets on file. They represent jobs that have been worked on during March of the current year. This table summarizes information provided on each sheet: (a) What is the cost of goods sold for the month of March? (b) What is the cost of the goods in process inventory on March 31? (c) What is the cost of the finished goods inventory on March 31?