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Exam 2: Job Order Costing and Analysis

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Question 91

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Portside Watercraft uses a job order costing system. During one month Portside purchased $173,000 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 issuance of materials to production is:

A) Debit Raw Materials Inventory $153,000; credit Accounts Payable $153,000.
B) Debit Work in Process Inventory $140,000; debit Factory Overhead $24,000; credit Raw Materials Inventory $164,000.
C) Debit Raw Materials Inventory $195,000; credit Work in Process Inventory $195,000.
D) Debit Work in Process Inventory $140,000; debit Raw Materials Inventory $24,000; credit Materials Inventory $164,000.
E) Debit Finished Goods Inventory $140,000; credit Raw Materials Inventory $140,000.

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Question 92

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If overapplied or underapplied overhead is material, it should be disposed of by allocating it to:

A) Cost of goods sold and finished goods inventory.
B) Finished goods inventory and work in process inventory.
C) Work in process inventory, finished goods inventory, and cost of goods sold.
D) Work in process inventory.
E) Raw materials inventory, work in process inventory, and finished goods inventory.

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Question 93

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Overapplied overhead is the amount by which overhead applied to jobs using the predetermined overhead rate exceeds the actual overhead incurred during a period.

Heintz Company's job order costing 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, $36,000. At year-end, the total cost of Work in Process is $38,000, which includes $12,000 of direct labor cost. What amount of direct material cost is included in the ending Work in Process inventory?

Job order production systems would be appropriate for companies that produce training films for a specific customer or custom-made furniture to be used in a new five-star resort hotel.

At the end of June, the job cost sheets for Kennedy Manufacturing show the following total costs accumulated on three custom jobs. $\begin{array} { | l | l | l | l | } \hline & \text { Job 203 } & \text { Job 204 } & \text { Job 205 } \\\hline \text { Direct materials } & \$ 32,000 & \$ 47,000 & \$ 43,000 \\\hline \text { Direct labor } & 18,000 & 22,000 & 25,000 \\ \hline \text { Overhead } & 26,100 & 31,900 & 36,250 \\\hline\end{array}$ Job 203 was started in production in May and the following costs were assigned to it in May: direct materials, $12,000; direct labor, $6,000; and overhead $8,700. Jobs 204 and 205 are started in June. Overhead cost is applied with a predetermined rate based on direct labor cost. Jobs 203 and 204 are finished in June, and Job 205 will be finished in July. No raw materials are used indirectly in June. Using this information, answer the following questions assuming the company's predetermined overhead rate did not change. a. What is the cost of the raw materials requisitioned in June for each of the three jobs? b. How much direct labor cost is incurred during June for each of the three jobs? c. What predetermined overhead rate is used during June? d. How much total cost is transferred to finished goods during June?

When time ticket information is entered into the accounting system, the journal entry is a debit to Factory Wages Payable and a credit to Work in Process Inventory.

Nutley Company uses a job order cost system and last period incurred $70,000 of overhead and $100,000 of direct labor. Nutley estimates that its overhead next period will be $65,000. The company also expects to incur $100,000 of direct labor. If Nutley bases its overhead applied on direct labor cost, what should be the overhead rate for the next period?

A document in a job order costing system that is used to record the costs of producing a job is a(n) :

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

In a job order costing system, raw materials requisitioned as direct materials are debited to ________; indirect materials are debited to ________.

A system of accounting for production operations that produces timely information about inventories and manufacturing costs per unit of product is a:

Selected information from the budget of the Singh Corp. at the beginning of the year follows: $\begin{array} { | l | r | } \hline \text { Estimated factory overhead } & \$ 132,000 \\\hline \text { Estimated direct labor hours } & 55,000 \text { hours } \\\hline \text { Estimated machine hours ......... } & 41,250 \text { hours } \\\hline \text { Estimated direct labor cost } & \$ 825,000 \\\hline \text { Actual factory overhead } & \\ \text { incurred during the year } &\$ 144,000 \\\hline\end{array}$ Calculate the predetermined overhead rate if the company uses the following as a basis: (a) Direct labor hours. (b) Direct labor cost. (c) Machine hours.

At the current year-end, Simply Company found that its overhead was underapplied by $2,500, and this amount was not considered material. Based on this information, Simply should:

The balance in the Work in Process Inventory at any point in time is equal to:

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

Chen Service applied overhead on the basis of direct labor costs during the current year. Overhead applied was $16,500. Actual overhead incurred was $17,200. (a) Prepare a journal entry to remove this difference assuming that it is not material. (b) Instead, assume actual overhead incurred was $24,000. Describe (without computations) the alternative procedure that Chen might perform assuming this difference is material.

Cost accounting systems accumulate manufacturing costs and then assign them to products and services.

The Luna Manufacturing Company has the following job cost sheets on file. They represent jobs that have been worked on during September of the current year. This table summarizes information provided on each sheet: (a) What is the cost of the Work in Process inventory on September 30? (b) What is the cost of the finished goods inventory on September 30? (c) What is the cost of goods sold for the month of September?

Job order production systems would be appropriate for companies that produce custom homes, specialized equipment, and special computer systems.