Job Order Pure Problems

PROBLEM 1. Prepare the necessary journal entries from the following information for Anderson Company, which uses a perpetual inventory system. a.

Purchased raw material on account, $56,700.

b.

Requisitioned raw material for production as follows: direct material-80 percent of purchases; indirect material-15 percent of purchases.

c.

Direct labor wages of $33,100 are accrued as are indirect labor wages of $12,500.

d.

Overhead incurred and paid for is $66,900.

e.

Overhead is applied to production based on 110 percent of direct labor cost.

f.

Goods costing $97,600 were completed during the period.

g.

Goods costing $51,320 were sold on account for $77,600.

ANS: a.

Raw Material Inventory

56,700

Accounts Payable b.

Work in Process Inventory Manufacturing Overhead

56,700 45,360 8,505

Raw Material Inventory c.

53,865

Work in Process Inventory

33,100

Manufacturing Overhead

12,500

Wages Payable d.

Manufacturing Overhead

45,600 66,900

Cash e.

Work in Process Inventory

66,900 36,410

Manufacturing Overhead f.

Finished Goods Inventory

36,410 97,600

Work in Process Inventory g.

Cost of Goods Sold

97,600 51,320

Finished Goods Inventory Accounts Receivable Sales

51,320 77,600 77,600

2. Richards Company employs a job order costing system. Only three jobs-Job #205, Job #206, and Job #207-were worked on during January and February. Job #205 was completed February 10; the other two jobs were still in production on February 28, the end of the company's operating year. Job cost sheets on the three jobs follow: Job Cost Sheet Job #205

Job #206

Job #207

$16,500

$ 9,300

$

Direct labor

13,000

7,000

—

Manufacturing overhead

20,800

11,200

—

—

8,200

21,300

6,000

10,000

January costs incurred: Direct material

—

February costs incurred: Direct materials Direct labor Manufacturing overhead

4,000 ?

?

The following additional information is available: a.

Manufacturing overhead is assigned to jobs on the basis of direct labor cost.

b.

Balances in the inventory accounts at January 31 were as follows:

Raw Material

$40,000

Work in Process

?

Finished Goods

85,000

?

Required: a.

Prepare T-accounts for Raw Material, Work in Process Inventory, Finished Goods Inventory, and Manufacturing Overhead Control. Enter the January 31 inventory balances given previously; in the case of Work in Process Inventory, compute the January 31 balance and enter it into the Work in Process Inventory T-account.

b.

Prepare journal entries for February as follows:

1.

Prepare an entry to record the issue of materials into production and post the entry to appropriate T-accounts. (In the case of direct material, it is not necessary to make a separate entry for each job.) Indirect materials used during February totaled $4,000.

2.

Prepare an entry to record the incurrence of labor cost and post the entry to appropriate Taccounts. (In the case of direct labor, it is not necessary to make a separate entry for each job.) Indirect labor cost totaled $8,000 for February.

3.

Prepare an entry to record the incurrence of $19,000 in various actual manufacturing overhead costs for February (credit Accounts Payable).

c.

What apparent predetermined overhead rate does the company use to assign overhead cost to jobs? Using this rate, prepare a journal entry to record the application of overhead cost to jobs for February (it is not necessary to make a separate entry for each job). Post this entry to appropriate T-accounts.

d.

As stated earlier, Job #205 was completed during February. Prepare a journal entry to show the transfer of this job off of the production line and into the finished good warehouse. Post the entry to appropriate T-accounts.

e.

Determine the balance at February 28 in the Work in Process inventory account. How much of this balance consists of the cost of Job #206? Job #207?

ANS: a. Raw Materials Inventory BB 40,000

Work in Process Inventory BB 77,800 29,500 60,700

31,500

20,000 32,000 98,600

Finished Goods Inventory BB 85,000 60,700

Manufacturing Overhead Control 4,000 8,000

32,000

19,000

b.

1.

Work in Process Inventory Manufacturing Overhead Control

29,500 4,000

Raw Materials Inventory

2.

Work in Process Inventory Manufacturing Overhead Control

33,500

20,000 8,000

Payroll

3.

Manufacturing Overhead Control

28,000

19,000

Accounts Payable

c.

19,000

160%/DL COST$20,000 = $32,000

Work in Process Inventory Manufacturing Overhead Control

32,000 32,000

d.

Finished Goods Inventory

60,700

Work in Process Inventory

e.

60,700

WIP INV

98,600

Job 206 = $51,300

Job 207 = $47,300

JOB #205

JOB #206

JOB #207

$50,300

$27,500

-

0

8,200

$21,300

Direct Labor

4,000

6,000

10,000

Factory Overhead

6,400

9,600

16,000

$60,700

$51,300

$47,300

Beg WIP Direct Mat

DIF: Moderate

OBJ: 4-4

3. The Pittman Company manufactures special purpose machines to order. On January 1, there were two jobs in process, #705 and #706. The following costs were applied to these jobs in the prior year: Job No. 705

706

$ 5,000

$ 8,000

Direct labor

4,000

3,000

Overhead

4,400

3,300

$13,400

$14,300

Direct material

Total

During January, the following transactions took place: *

Raw material costing $40,000 was purchased on account.

*

Jobs #707, #708, and #709 were started and the following costs were applied to them:

JOB

Direct materials

707

708

709

$3,000

$10,000

$7,000

5,000

6,000

4,000

Direct labor

*

Job #705 and Job #706 were completed after incurring additional direct labor costs of $2,000 and $4,000, respectively

*

Wages paid to production employees during January totaled $25,000.

*

Depreciation for the month of January totaled $10,000.

*

Utilities bills in the amount of $10,000 were paid for operations during December.

*

Utilities bills totaling $12,000 were received for January operations.

*

Supplies costing $2,000 were used.

*

Miscellaneous overhead expenses totaled $24,000 for January.

Actual overhead is applied to individual jobs at the end of each month using a rate based on actual direct labor costs. Required:

a.

Determine the January overhead rate.

b.

Determine the cost of each job.

c.

Prepare a statement of cost of goods manufactured.

ANS: a.

MOH $4,000 + $10,000 + $12,000 + $2,000 + $24,000 =

$52,000 = $2.4762/dl cost $21,000 dl cost

b.

JOB #705 DM DL MOH Beg WIP

c.

JOB #706

JOB #707

JOB #709

-

-

$ 3,000

$10,000

$ 1,000 =

$ 2,000

$ 4,000

5,000

6,000

4,000 =

21,000

4,952

9,905

12,381

14,857

9,905 =

52,000

13,400

14,300

-

-

- =

27,700

$20,352

$28,205

$20,381

$30,857

Beg WIP

$27,700

+ DM

20,000

+ DL

21,000

+ MOH

52,000

- End WIP

72,143 $48,557

DIF: Moderate

JOB #708

OBJ: 4-4

$20,905

$

20,000

$120,700

4. The Western Corporation, began operations on October 1. It employs a job order costing system. Overhead is charged at a normal rate of $2.50 per direct labor hour. The actual operations for the month of October are summarized as follows: a.

Purchases of raw material, 25,000 pieces @ $1.20/piece.

b.

Material and labor costs charged to production:

c.

Job No.

Units

Material

Direct labor cost

Direct labor hours

101

10,000

$4,000

$6,000

3,000

102

8,800

3,600

5,400

2,700

103

16,000

7,000

9,000

4,500

104

8,000

3,200

4,800

2,400

105

20,000

8,000

3,600

1,800

Actual overhead costs incurred:

Variable Fixed

$18,500 15,000

d.

Completed jobs: 101, 102, 103, and 104

e.

Sales-$105,000. All units produced on Jobs 101, 102, and 103 were sold.

Required: Compute the following balances on October 31: a.

Material inventory

b.

Work in process inventory

c.

Finished goods inventory

d.

Cost of goods sold

e.

Under- or overapplied overhead

ANS: a.

$30,000 - ($4,000 + $3,600 + $7,000 + $3,200 + $8,000) = $4,200

b.

Job #105

$8,000 + $3,600 + ($1,8002.50) = $16,100

c.

Job #104

$3,200 + $4,800 + ($2,4002.50) = $14,000

d.

Job #

101

$4,000 + $6,000 + ($3,0002.50) =

$17,500

102

$3,600 + $5,400 + ($2,7002.50) =

15,750

103

$7,000 + $9,000 + ($4,5002.50) =

27,250 $60,500

e.

Applied 14,400$2.50 =

33,500

Actual

$ 2,500

Overapplied

DIF: Moderate

$36,000

OBJ: 4-4

Steel Company. Steel Company uses a job order costing system and develops its predetermined overhead rate based on machine hours. The company has two jobs in process at the end of the cycle, Jobs #177 and #179. Budgeted overhead Budgeted machine hours

$100,300 85,000

Raw material

$ 63,000

Labor cost

$ 50,000

5. Refer to Steel Company. What amount of overhead is charged to Jobs #177 and #179? Machine hours are split between Jobs #177 and #179-65 percent and 35 percent, respectively. Actual machine hours equal budgeted machine hours.

ANS: OH Applied = MH CostPOHR Job #177: 85,000 MH 65%= 55,250$1.18 = $65,195 Job #179: 85,000 MH35%= 29,750$1.18 = $35,105 DIF: Easy

OBJ: 4-4

6. Refer to Steel Company. Fifty-four percent of raw material belongs to Job 17 and 38 percent belongs to Job 179, and the balance is considered indirect material. What amount of raw material used was allocated to overhead as indirect material? ANS: 54% + 38% = 92%; this means that 8% is indirect or $5,040 (.08$63,000). DIF: Easy

OBJ: 4-4

7. Refer to Steel Co. Labor cost was split 25 percent and 70 percent, respectively, between Jobs #177 and #179 for direct labor. The remainder was indirect labor cost. What are the total costs of Jobs #177 and #179? ANS: Job #177

Job #179

$ 34,020

$23,940

DL

12,500

35,000

MOH

65,195

35,105

$111,715

$94,045

DM

DIF: Moderate

OBJ: 4-4

8. Sanderson Company manufactures custom-built conveyor systems for factory and commercial operations. Erin Smith is the cost accountant for Sanderson and she is in the process of educating a new employee, Heather Fontenot about the job order costing system that Sanderson uses. (The system is based on normal costs; overhead is applied based on direct labor cost and rounded to the next whole dollar.) Lisa gathers the following job order cost records for July: Direct

Direct

Total

Job No.

Materials

Labor

Applied OH

Cost

667

$ 5,901

$1,730

$ 1,990

$ 9,621

669

18,312

1,810

2,082

22,204

670

406

500

575

1,481

671

51,405

9,500

10,925

71,830

672

9,615

550

633

10,798

To explain the missing job number, Erin informed Heather that Job #668 had been completed in June. She also told her that Job #667 was the only job in process at the beginning of July. At that time, the job had been assigned $4,300 for direct material and $900 for direct labor. At the end of July, Job #671 had not been completed; all others had. Erin asked Heather several questions to determine whether she understood the job order system. Required: Help Heather answer the following questions: a.

What is the predetermined overhead rate used by ABC Company?

b.

What was the total cost of beginning Work in Process inventory?

c.

What was total prime cost incurred for the month of July?

d.

What was cost of goods manufactured for July?

ANS: a.

Use any job started in July:

Rate =

MOH DL COST

JOB $670

$575 $500

= 115%/DL Cost

b.

DM

$4,300

DL

900

FOH

1,035 ($900115%) $6,235

c.

Prime Cost =DM + DL

DM = $85,639 - 4,300 = $81,339 DL =

14,090 -

900 =

13,190 $94,529

d.

COGM

DIF: Easy

=

$9,621 + 22,204 + 1,481 + 10,798 =

OBJ: 4-4

$44,104

9. Perry Company uses a job order costing system and has the following information for the first week of June: 1.

Direct labor and direct materials used:

Job No.

Direct Material

Direct Labor Hours

498

$1,500

116

506

960

16

507

415

18

508

345

42

509

652

24

511

308

10

512

835

30

$5,015

256

Total

2.

The direct labor wage rate is $4 per hour.

3.

The overhead rate is $5 per direct labor hour.

4.

Actual overhead costs for the week, $1,480.

5.

Jobs completed: Nos. 498, 506, and 509.

6.

The factory had no work in process at the beginning of the week.

Required: a.

Prepare a summary that will show the total cost assigned to each job.

b.

Compute the amount of overhead over- or underapplied during the week.

c.

Calculate the cost of the work in process at the end of the week.

ANS: a.

b.

Job No.

DM

498

$1,500

506

960

507

DL 464

$2,544

64

80

1,104

415

72

90

577

508

345

168

210

723

509

652

96

120

868

511

308

40

50

398

512

835

120

150

1,105

$5,015

$1,024

$1,280

$7,319

$1,480

Applied MOH

c.

1,280

Underapplied

$

200

JOB

$

577

507 508

723

511

398

512

1,105

Ending WIP

$2,803

DIF: Easy

$

Total

580

Actual MOH

$

OH

OBJ: 4-4

10. You are asked to bring the following incomplete accounts of Andrepont Printing, Inc. up to date through January 31,20X5. Consider the data that appear in the T-accounts as well as additional information given in items (a) through (i). Andrepont’s job order costing system has two direct cost categories (direct material and direct manufacturing labor) and one indirect cost pool (manufacturing overhead, which is allocated using direct manufacturing labor costs). Materials Inventory Control

Wages Payable Control

12/31/20X4

1/31/20X5

Balance 15,000

Balance 3,000

Manufacturing Department Work in Process Inventory Control

Overhead Control January

20X5

Charges 57,000

Manufacturing Overhead Control

Finished Goods Inventory Control

Cost of Goods Sold

12/31/20X4 Balance 20,000

Additional Information: a.

Manufacturing department overhead is allocated using a budgeted rate set every December. Management forecasts next year's overhead and next year's direct manufacturing labor costs. The budget for 20X5 is $400,000 of direct manufacturing labor and $600,000 of manufacturing overhead.

b.

The only job unfinished on January 31, 20X5 is No. 419, on which direct manufacturing labor costs are $2,000 (125 direct manufacturing labor hours) and direct material costs are $8,000.

c.

Total material placed into production during January is $90,000.

d.

Cost of goods completed during January is $180,000.

e.

Material inventory as of January 31, 20X5 is $20,000.

f.

Finished goods inventory as of January 31, 20X5 is $15,000.

g.

All plant workers earn the same wage rate. Direct manufacturing labor hours for January totals 2,500. Other labor and supervision totals $10,000.

h.

The gross plant payroll on January paydays totals $52,000. Ignore withholdings. All personnel are paid on a weekly basis.

i.

All "actual" manufacturing department overhead incurred during January has already been posted.

Required:

a.

Material purchased during January

b.

Cost of Goods Sold during January

c.

Direct Manufacturing Labor Costs incurred during January

d.

Manufacturing Overhead Allocated during January

e.

Balance, Wages Payable Control, December 31, 20X4

f.

Balance, Work in Process Inventory Control, January 31, 20X5

g.

Balance, Work in Process Inventory Control, December 31, 20X4

h.

Balance, Finished Goods Inventory Control, January 31, 20X5

i.

Manufacturing Overhead underapplied or overapplied for January

ANS: a.

$15,000 + Purchases - $20,000 = $90,000. Purchases = $95,000

b.

$20,000 + $180,000 - $15,000 = $185,000

c.

DL = $2,000 = $16/HR2,500 HRS = $40,000 125

d.

$600,000 = 150% DL cost$40,000 = $60,000 $400,000

e.

BEGIN + $50,000 - $52,000 = $3,000 BEGIN = $5,000

f.

$2,000 + ($2,000150%) + $8,000 = $13,000

g.

BEGIN + $90,000 + $40,000 + $60,000 - $180,000 = $13,000 BEGIN = $3,000

h.

$20,000 + $180,000 - $185,000 = END = $15,000

i.

APPLIED

$60,000

ACTUAL

57,000 $ 3,000 overapplied

DIF: Moderate

OBJ: 4-4

11. Beauty Company manufactures picture frames of all sizes and shapes and uses a job order costing system. There is always some spoilage in each production run. The following costs relate to the current run: Estimated overhead (exclusive of spoilage)

$160,000

Spoilage (estimated)

$ 25,000

Sales value of spoiled frames

$ 11,500 100,000

Labor hours

The actual cost of a spoiled picture frame is $7.00. During the year 170 frames are considered spoiled. Each spoiled frame can be sold for $4. The spoilage is considered a part of all jobs. a.

Labor hours are used to determine the predetermined overhead rate. What is the predetermined overhead rate per direct labor hour?

b.

Prepare the journal entry needed to record the spoilage.

c.

Prepare the journal entry if the spoilage relates only to Job #12 rather than being a part of all production runs.

ANS: a.

$160,000 + $25,000 - $11,500 = $173,500 $173,500/100,000 = $1.735 per DLH

b.

Disposal Value of Spoiled Work

680

Manufacturing Overhead

510 1,190

Work in Process Inventory c.

Disposal Value of Spoiled Work Work in Process Inventory-Job #12

DIF: Moderate

OBJ: 4-8

680 680