You are on page 1of 77

Managerial Accounting: Tools for Business Decision-Making, Third Canadian Edition

Weygandt, Kimmel, Kieso, Aly

Comm 305 Chapter 3 Review


Questions
1. (a) Joe Delong is not sure about the difference between cost accounting and a cost
accounting system. Explain the difference to Joe.
(b) What is an important feature of a cost accounting system?
2. (a) Distinguish between the two types of cost accounting systems.
(b) Can a company use both types of cost accounting systems?
3. What type of industry is likely to use a job-order cost system? Give some examples.
4. What type of industry is likely to use a process cost system? Give some examples.
5. Your roommate asks for your help in understanding the major steps in the flow of costs
in a job-order cost system. Identify the steps for your roommate.
6. A job-order cost system has three inventory control accounts. Identify the control
accounts and their subsidiary ledgers.
7. What source documents are used in accumulating direct labour costs?
8. Entries to Manufacturing Overhead are normally made only daily. Do you agree?
Explain.
9. Tony Andres is confused about the source documents used in assigning materials and
labour costs. Identify the documents and give the entry for each document.
10. What is the purpose of a job cost sheet?
11. Indicate the source documents that are used in charging costs to specific jobs.
12. Explain the purpose and use of a materials requisition slip, as used in a job-order
cost system.
13. Shakira Finney believes actual manufacturing overhead should be charged to jobs. Do
you agree? Why or why not?
14. What relationships are involved in calculating a predetermined overhead rate?
15. How can you verify the agreement of Work in Process Inventory and job cost sheets?
16. Tina Papadakis believes that the cost of goods manufactured schedule in job-order
cost accounting is the same as shown in Chapter 2. Is Tina correct? Explain.
17. Adib Haddad is confused about under- and over-applied manufacturing overhead.
Define the terms for Adib, and identify the balance in the manufacturing overhead account
that is applicable to each term.
18. At the end of the year, under- or over-applied overhead is closed to Income
Summary. Is this correct? If not, explain the customary treatment of this amount.

Solutions Manual 2011 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
3-1

Managerial Accounting: Tools for Business Decision-Making, Third Canadian Edition

1.

Weygandt, Kimmel, Kieso, Aly

ANSWERS TO QUESTIONS

(a) Cost accounting involves the measuring, recording, and reporting of product costs. A cost
accounting system consists of manufacturing cost accounts that are fully integrated into the
general ledger of a company.
(b) An important feature of a cost accounting system is the use of a perpetual inventory system
that provides immediate, up-to-date information on the cost of a product.

2.

(a) The two principal types of cost accounting systems are: (1) job-order cost system and
(2) process cost system. Under a job-order cost system, costs are assigned to each job or
batch of goods; at all times each job or batch of goods can be separately identified. A joborder cost system measures costs for each completed job, rather than for set time periods. Unit
costs are determined by dividing the total cost of the job by the number of units produced.
Under a process cost system, product-related costs are accumulated by or assigned to
departments or processes for a set period of time. Job-order costing lends itself to specific,
special-order manufacturing or servicing while process costing is better suited to similar, largevolume products and continuous process manufacturing. Unit costs in a process costing
system are determined by dividing the total processing costs for a certain period of
time by the number of units produced during that time.
(b) A company may use both types of systems. For example, General Motors uses process costing
for standard model cars and job-order costing for custom-made vehicles.

3.

A job-order cost system is most likely to be used by a company that receives special orders, or
custom builds, or produces heterogeneous items or products; that is, the product manufactured or
the service rendered is tailored to the customer or clients requests, needs, or situation. Examples
of industries that use job-order systems are custom home builders, commercial printing companies,
motion picture companies, construction contractors, repair shops, accounting and law firms,
hospitals, shipbuilders, and architects.

4.

A process cost system is most likely to be used by manufacturing firms with continuous production
flows usually found in mass production, assembly line, large-volume, uniform, or relatively similar
product industries. Companies producing appliances, chemicals, pharmaceuticals, rubber and tires,
plastics, cement, petroleum, and automobiles utilize process cost systems.

5.

The major steps in the flow of costs in a job-order cost system are: (1) accumulating the manufacturing
costs incurred and (2) assigning the accumulated costs to work in process.

6.

The three inventory control accounts and their subsidiary ledgers are:
Raw materials inventorymaterials inventory records.
Work in process inventoryjob cost sheets.
Finished goods inventoryfinished goods records.

7.

The source documents used in accumulating direct labour costs are time tickets and time cards.

8.

Disagree. Entries to Manufacturing Overhead are also made periodically during an accounting
period. For example, there will be adjusting entries for factory depreciation, property taxes, and
insurance.

Solutions Manual 2011 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
3-2

Managerial Accounting: Tools for Business Decision-Making, Third Canadian Edition

9.

Weygandt, Kimmel, Kieso, Aly

The source document for materials is the materials requisition slip and the source document for
labour is the time ticket. The entries are:
Materials
Work in Process Inventory
Manufacturing Overhead
Raw Materials Inventory

Labour
XX
XX

XX

Work in Process Inventory


Manufacturing Overhead
Factory Labour

XX
XX

XX

10.

The purpose of a job cost sheet is to record the costs assigned to a specific job and to determine the
total and unit costs of the completed job.

11.

The source documents for charging costs to specific jobs are materials requisition slips for direct
materials, time tickets for direct labour, and the predetermined overhead rate for manufacturing
overhead.

12.

The materials requisition slip is a business document used as an authorization to issue materials
from inventory to production. It is approved and signed by authorized personnel so that materials may
be removed from inventory and charged to production, to specific jobs, departments, or processes.
The materials requisition slip is the basis for posting to the materials inventory records and to the job
cost sheet.

13.

Disagree. Actual manufacturing overhead cannot be determined until the end of a period of time.
Consequently, there could be a significant delay in assigning overhead and in determining the
total cost of the completed job.

14.

The relationships for computing the predetermined overhead rate are the estimated annual overhead
costs and an associated activity base such as direct labour hours. The rate is computed by
dividing the estimated annual overhead costs by the expected annual operating activity.

15.

At any point in time, the balance in Work in Process Inventory should equal the sum of the costs
shown on the job cost sheets of unfinished jobs. Alternatively, posting to Work in Process Inventory
may be compared with the sum of the postings to the job cost sheets for each of the manufacturing
cost elements.

16.

Tina is incorrect. There is a difference in computing total manufacturing costs. In job-order costing,
manufacturing overhead applied is used, whereas in Chapter 2, actual manufacturing overhead
is used.

17.

Under-applied overhead means that the overhead assigned to work in process is less than the
overhead incurred. Over-applied overhead means that the overhead assigned to work in process
is greater than the overhead incurred. Manufacturing Overhead will have a debit balance when
overhead is under-applied and a credit balance when overhead is over-applied.

18.

Under- or over-applied overhead is not closed to Income Summary. The balance in Manufacturing
Overhead is eliminated through an adjusting entry. Under- or over-applied overhead generally is
considered to be an adjustment of Cost of Goods Sold.

Solutions Manual 2011 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
3-3

Brief Exercises
Prepare a flowchart of a job-order system, and identify transactions.
BE3-1
Reyes Tool & Die begins operations on January 1. Because it does all the work to customer specifications, the company decides
to use a job-order costing system. Prepare a flow chart of a typical job-order cost accounting system with arrows showing the
flow of costs. Identify the eight transactions.
Prepare entries in accumulating manufacturing costs.
BE3-2
During January, its first month of operations, Reyes Tool & Die accumulated the following manufacturing costs: raw materials
$5,000 on account; factory labour $7,000, of which $5,600 relates to factory wages payable and $1,400 relates to payroll taxes
payable; and utilities payable $2,000. Prepare separate journal entries for each type of manufacturing cost.
Prepare an entry for the assignment of raw materials costs.
BE3-3
In January, Reyes Tool & Die requisitions raw materials for production as follows: Job 1 $1,200, Job 2 $1,500, Job 3 $900, and
general factory use $800. Prepare a summary journal entry to record raw materials used.
Prepare an entry for the assignment of factory labour costs.
BE3-4
Factory labour data for Reyes Tool & Die are given in BE3-2. During January, time tickets show that the factory labour of $5,600
was used as follows: Job 1 $1,400, Job 2 $1,800, Job 3 $1,600, and general factory use $800. Prepare a summary journal entry
to record factory labour used.
Prepare job cost sheets.
BE3-5
Data pertaining to job cost sheets for Reyes Tool & Die are given in BE3-3 and BE3-4. Prepare the job cost sheets for each of the
three jobs. (Note: You may omit the column for Manufacturing Overhead.)
Calculate applied overhead.
BE3-6
Job 105M-T had direct material costs of $4,000 and a total manufacturing cost of $21,000. Manufacturing overhead is applied at
the rate of 75% of the prime cost. How much manufacturing overhead was applied?

Using predetermined overhead rates.


BE3-7
During the first quarter, Phuong Company incurs the following direct labour costs: January $40,000, February $30,000, and
March $50,000. For each month, prepare the entry to assign overhead to production using a predetermined rate of 90% of
direct labour costs.
Prepare adjusting entries for under- and over-applied overhead.
BE3-8
In its first year of operation, Montreal Printing Shop estimated manufacturing overhead costs and activity in order to determine
a predetermined overhead rate. At year end, overhead was over-applied by $3,500. It has been decided this over-applied
overhead is material at the end of the year and the amount should be allocated among 10% work-in-process, 25% finished
goods, and the rest to the cost of goods sold. Prepare the adjusting entry to close out the over-applied overhead.


201
1
For
Inst
ruct
or
Use
Onl
y

Raw Materials Inventory


(1) Purchases
(4) Materials
used

Work in Process Inventory


(4) Direct
(7) Cost of
materials
comused
pleted jobs
(5) Direct labour
used
(6) Overhead
applied

Finished Goods Inventory


(7) Cost of com(8) Cost of goods
pleted jobs
sold

SOLU
TIONS
TO
BRIEF
EXER
CISES
BRIEF
EXERCI
SE 3-1

3-7

Factory Labour
(2) Factory labour (5) Factory labour
incurred
used

Cost of Goods Sold


(8) Cost of goods
sold

Key to Entries:
Accumulation
1. Purchase raw materials
2. Incur factory labour
3. Incur manufacturing
overhead
Manufacturing Overhead
(3) Depreciation
(6) Overhead
Insurance
applied
Repairs
(4) Indirect
materials used
(5) Indirect
labour used

Assignment
4.
5.
6.
7.
8.

Raw materials are used


Factory labour is used
Overhead is applied
Completed goods are recognized
Cost of goods sold is recognized

BRIEF EXERCISE 3-2


Jan. 31

Raw Materials Inventory.......................................


Accounts Payable..........................................

5,000
5,000

31

Factory Labour......................................................
7,000
Factory Wages Payable.................................
5,600
Employer Payroll Taxes Payable.................. 1,400

31

Manufacturing Overhead......................................
Utilities Payable.............................................

2,000
2,000

BRIEF EXERCISE 3-3


Jan. 31

Work in Process Inventory (1,200+1,500+900)....


Manufacturing Overhead......................................
Raw Materials Inventory...............................

3,600
800
4,400

BRIEF EXERCISE 3-4


Jan. 31

Work in Process Inventory (1,400+1,800+1,600).


Manufacturing Overhead......................................
Factory Labour..............................................

5,600
800
5,600

BRIEF EXERCISE 3-5

Date
1/31
1/31

Job 1
Direct
Materials
1,200

Direct
Labour
1,200

Date
1/31
1/31

Date
1/31
1/31
Job 3
Direct
Materials
900

Job 2
Direct
Materials
1,500

Direct
Labour
1,400

Direct
Labour
1,600

BRIEF EXERCISE 3-6


Direct material + Direct labour = Prime cost
Direct material + Direct labour + Applied MOH = Total manufacturing cost
$4,000 + DL + .75($4,000 + DL) = $21,000
Thus, DL = $8,000;
and MOH = .75($4,000 + $8,000) = $9,000
[Proof: $4,000 + $8,000 + $9,000 = $21,000]
BRIEF EXERCISE 3-7
Jan. 31

Work in Process Inventory..............................


Manufacturing Overhead..........................
($40,000 90%)

36,000
36,000

Feb. 28

Work in Process Inventory..............................


Manufacturing Overhead..........................
($30,000 90%)

27,000
27,000

Mar. 31

Work in Process Inventory..............................


Manufacturing Overhead..........................
($50,000 90%)

45,000
45,000

BRIEF EXERCISE 3-8


Dec. 31

Manufacturing Overhead.................................
Work-in-process Inventory.......................
Finished Goods Inventory........................
Cost of Goods Sold..................................

3,500

350
875
2,275

Exercises
Prepare
E313TorontoInc.,hasaccumulatedthefollowingcostsforjob45TFatJune1.
journal
Directmaterials
entriesfor
manufacturin
Directlabour($14perhr)
gcosts.
Manufacturingoverhead

$26,400
5,600
3,920

Thecompanyusesnormalcostingsystemandappliesmanufacturingoverheadonthebasisofdirect
labourcosts.DuringJunethecompanycompletedthejob45TFbyadding$4,000fordirectmaterialand
200directlabourhours.

Instructions
(a)Preparetheproperentrytorecordthemanufacturingcostsforjob45FTduringmonthofJune.
(b)Preparetheproperentrytorecordtotransfercostsofjob45TFfromtheworkprocesstofinished
goods.

Prepare
E314MilnerManufacturingusesajobordercostingsystem.OnMay1,thecompanyhasabalanceinWorkin
journalentries
ProcessInventoryof$3,200andtwojobsinprocess:JobNo.429$2,000,andJobNo.430$1,200.
for
DuringMay,asummaryofsourcedocumentsrevealsthefollowing:
manufacturin
JobNumber
MaterialsRequisitionSlips
LabourTimeTickets
gcosts.
429

$2,500

$2,200

430

3,600

3,000

431

4,400

$10,500

7,600

$12,800

Generaluse

1,000

1,500

$11,500

$14,300

MilnerManufacturingappliesmanufacturingoverheadtojobsatanoverheadrateof80%ofdirectlabour
cost.JobNo.429iscompletedduringthemonth.

Instructions
(a)Preparesummaryjournalentriestorecordthe:
1.

2.

3.

4.

requisitionslips
timetickets
assignmentofmanufacturingoverheadtojobs
completionofJobNo.429

(b)PosttheentriestoWorkinProcessInventory,andprovetheagreementofthecontrolaccountwith
thejobcostsheets.
Analyzeajob E315AjobordercostsheetforRolenCompanyisshownbelow.
costsheetand
prepare
JobNo.92

entriesfor
Date
DirectMaterials
DirectLabour
manufacturin
gcosts.
BeginningBalance

For2,000Units
ManufacturingOverhead

January1

$3,925

$6,000

$4,200

6,000

12

8,500

6,375

25

2,000

27

4,000

3,000

11,925

18,500

13,575

Costofcompletedjob:

Directmaterials

$11,925

Directlabour

18,500

Manufacturingoverhead

13,575

$44,000

$22.00

Totalcost
Unitcost($44,000/2,000)

Instructions
(a)Onthebasisoftheforegoingdata,answerthefollowingquestions:
1.

2.

WhatwasthebalanceinWorkinProcessInventoryonJanuary1ifthiswastheonly
unfinishedjob?
Ifmanufacturingoverheadisappliedonthebasisofdirectlabourcost,whatoverheadratewas
usedineachyear?

(b)PreparesummaryentriesatJanuary31torecordthecurrentyear'stransactionspertainingtoJobNo.
92.
Analyzecosts E316ManufacturingcostdataforPenaCompany,whichusesajobordercostsystem,arepresentedbelow.
of

CaseA
CaseB
CaseC
manufacturin
gand
Directmaterialsused
(a)
$78,000
$72,600
determine
Directlabour
50,000
120,000
(h)
missing
amounts.
Manufacturingoverheadapplied
37,500
(d)
(i)
Totalmanufacturingcosts
Workinprocess1/1/11
Totalcostofworkinprocess

135,650

(e)

212,600

(b)

15,500

23,000

211,500

(f)

(j)


Workinprocess12/31/11
Costofgoodsmanufactured

CaseA

CaseB

CaseC

(c)

11,800

(k)

193,200

(g)

222,000

Instructions

Indicatethemissingamountforeachletter.Assumethatinallcasesmanufacturingoverheadisappliedon
thebasisofdirectlabourcostandtherateisthesame.
Calculatethe E317MillefeuilleCompanyappliesoperatingoverheadtophotocopyingjobsonthebasisofmachinehours
manufacturin
used.Itexpectsoverheadcoststototal$290,000fortheyearandestimatesmachineusageat125,000
goverhead
hours.
rateand
Fortheyear,thecompanyincurs$295,000ofoverheadcostsanduses130,000hours.
underor
overapplied
Instructions
overhead.
(a)Calculatetheserviceoverheadratefortheyear.
(b)CalculatetheamountofunderoroverappliedoverheadatDecember31.
(c)Assumingtheunderoroverappliedoverheadfortheyearisnotallocatedtoinventoryaccounts,
preparetheadjustingentrytoassigntheamounttocostofjobsfinished.
Analyzeajob E318AjobcostsheetofNilsonCompanyisgivenbelow.
costsheetand
preparean
JobCostSheet
entryforthe

JobNo.469
completed
job.

Item:WhiteLionCages

Quantity:2,000
DateRequested:7/2

Date

DirectMaterials

DirectLabour

ManufacturingOverhead

7/10

$825

12

900

15

$400

$560

22

350

490

24

1,600

27

1,500

31

500

700

Costofcompletedjob:

Directmaterials

Directlabour

Manufacturingoverhead

Totalcost

Unitcost

For:TeslaCompany

DateCompleted:7/31

Instructions
(a)Determinethesourcedocumentsfordirectmaterials,directlabour,andmanufacturingoverheadcosts

assignedtothisjob.
(b)Calculatepredeterminedmanufacturingoverheadrate.
(c)Calculatethetotalcostandtheunitcostofthecompletedjob.(Roundtheunitcosttothenearest
cent.)
(d)Preparetheentrytorecordthecompletionofthejob.

Prepare
E319AlbertaCompanyusesajobordercostingsystemtomeasure,record,andreportitsproductcosts.The
entriesfor
companystartedthemonthofAugustwith$2,300ofworkinprocess,andcostoffinishedgoodswas
manufacturin
$2,620.DuringAugustthecompanyaddedthefollowingcosts:
gcosts.
Directmaterialsrequisitions
$2,670
Directlabour

1,120

Actualoverhead

890

Appliedoverhead

910

Instructions

JournalizetheabovetransactionsduringAugust.(Omitexplanations.)

Prepare
E320GarnettPrintingCorp.usesajobordercostsystem.Thefollowingdatasummarizetheoperationsrelated
entriesfor
tothefirstquarter'sproduction:
manufacturin
gcosts.
1. Materialspurchasedonaccountwere$192,000,andfactorywagesincurredwere$91,500.

2. Materialsrequisitionedandfactorylabourusedbyjobwereasfollows:

JobNumber
Materials
FactoryLabour
A20

$33,240

$18,000

A21

42,920

24,000

A22

36,100

17,000

A23

41,270

25,000

Generalfactoryuse

4,470

7,500

$158,000

$91,500

3.

4.

5.

6.

Manufacturingoverheadcostsincurredonaccountwere$59,500.
Depreciationonmachineryandequipmentwas$14,550.
Themanufacturingoverheadrateis80%ofthedirectlabourcost.
JobscompletedduringthequarterwereA20,A21,andA23.

Instructions
Prepareentriestorecordtheoperationssummarizedabove.(Prepareascheduleshowingtheindividual
costelementsandtotalcostforeachjobinitem6.)

Prepareacost E321AtMay31,2012,theaccountsofHannifanManufacturingCompanyshowthefollowing:
ofgoods
manufactured
1. May1inventoriesfinishedgoods$12,600,workinprocess$17,400,andrawmaterials$8,200.
scheduleand

partial
2. May31inventoriesfinishedgoods$15,400,workinprocess$17,900,andrawmaterials$7,100.
financial

statements.
3. Debitpostingstoworkinprocessweredirectmaterials$54,200,directlabour$32,000,and
manufacturingoverheadapplied$40,000.
4. Salestotalled$200,000.

Instructions
(a)Prepareacondensedcostofgoodsmanufacturedschedule.
(b)PrepareanincomestatementforMaythroughgrossprofit.
(c)ProvidethebalancesheetpresentationofthemanufacturinginventoriesatMay31,2012.

Calculate E322LaubitzCompanybeginsoperationsonApril1.Informationfromjobcostsheetsshowsthefollowing:
workin
ManufacturingCostsAssigned
process
and
JobNumber
April
May
June
MonthCompleted
finished
10
$6,500
$4,400

May
goods
fromjob
11
4,100
3,900
$3,000
June
cost

sheets.

ManufacturingCostsAssigned
12

1,200

April

13

4,700

3,400

June

14

5,400

3,600

Notcomplete

Eachjobwassoldfor25%aboveitscostinthemonthfollowingcompletion.

Instructions
(a)CalculatethebalanceinWorkinProcessInventoryattheendofeachmonth.
(b)CalculatethebalanceinFinishedGoodsInventoryattheendofeachmonth.
(c)CalculatethegrossprofitforMay,June,andJuly.

Prepare E323ShownbelowarethejobcostrelatedaccountsforthelawfirmofDeWitte,Ozols,andMortonandtheir
entriesfor
manufacturingequivalents:
costsof
LawFirmAccounts
ManufacturingFirmAccounts
services
provided.
Supplies
RawMaterials
SalariesPayable

FactoryWagesPayable

OperatingOverhead

ManufacturingOverhead

WorkinProcess

WorkinProcess

CostofCompletedWork

CostofGoodsSold

CostdataforthemonthofMarchfollow.
1.

2.

3.

4.

5.

6.

Purchasedsuppliesonaccount$1,500.
Issuedsupplies$1,000(70%directand30%indirect).
Timecardsforthemonthindicatedlabourcostsof$55,000(75%directand25%indirect).
Operatingoverheadcostsincurredforcashtotalled$30,000.
Operatingoverheadisappliedatarateof80%ofdirectlawyercost.
Workcompletedtotalled$70,000.

Instructions
(a)JournalizethetransactionsforMarch.Omitexplanations.

(b)DeterminethebalanceoftheWorkinProcessaccount.UseaTaccount.

Determine E324PedroMoralesandAssociates,aCAfirm,usesjobordercostingtocapturethecostsofitsauditjobs.
costofjobs
TherewerenoauditjobsinprocessatthebeginningofNovember.Listedbelowaredataconcerningthe
andending
threeauditjobsconductedduringNovember:
balancein

Koppel
Dupont
Rojas
workin
progressand
Directmaterials
$700
$400
$250
overhead
Auditorlabourcosts
$5,400
$6,600
$3,375
accounts.
Auditorhours

72

90

40

Overheadcostsareappliedtojobsonthebasisofauditorhours,andthepredeterminedoverheadrateis
$60perauditorhour.TheKoppeljobistheonlyincompletejobattheendofNovember.Actualoverhead
forthemonthwas$12,000.

Instructions
(a)Determinethecostofeachjob.
(b)IndicatethebalanceoftheWorkinProcessaccountattheendofNovember.
(c)CalculatetheendingbalanceoftheOverheadaccountforNovember.
Determinethe E325EasyDecoratingusesajobordercostingsystemtocollectthecostsofitsinteriordecoratingbusiness.
predetermine
Eachclient'sconsultationistreatedasaseparatejob.Overheadisappliedtoeachjobbasedonthenumber
doverhead
ofdecoratorhoursincurred.Listedbelowaredataforthecurrentyear:
rate,apply
Estimatedoverhead
$840,000
overhead,and
determine
Actualoverhead
$861,000
whetherthe
Estimateddecoratorhours
40,000
overheadwas
underor
Actualdecoratorhours
41,500
overapplied.
ThecompanyusesOperatingOverheadinplaceofManufacturingOverhead.

Instructions
(a)Calculatethepredeterminedoverheadrate.
(b)Preparetheentrytoapplytheoverheadfortheyear.
(c)Determinewhethertheoverheadwasunderoroverappliedandbyhowmuch.

EXERCISE 3-13

SOLUTIONS TO EXERCISES

(a) June 30

Work in Process Inventory.....................


Raw Materials Inventory.................

4,000

30

Work in Process Inventory.....................


Factory Labour (200 hours $14)..

2,800

30

Work in Process Inventory.....................


($2,800 ($3,920 $5,600))
Manufacturing Overhead.................

1,960

(b) June 30

Finished Goods Inventory...................... 44,680


Work in Process Inventory.............
[(26,400+4,000)+(5,600+2,800)+(3,920+1,960)

EXERCISE 3-14

4,000
2,800

1,960
44,680

(a) May 31

31

31

31

Work in Process Inventory..................... 10,500


Manufacturing Overhead........................ 1,000
Raw Materials Inventory.................

11,500

Work in Process Inventory.....................


Manufacturing Overhead........................
Factory Labour................................

12,800
1,500

14,300

Work in Process Inventory.....................


($12,800 80%)
Manufacturing Overhead................

10,240

Finished Goods Inventory......................


Work in Process Inventory.............

8,460

($2,000 + $2,500 + $2,200 + $1,760*)

*$2,200 80%

10,240
8,460

EXERCISE 3-14 (Continued)


(b)

May 1 Balance
31
31
31
May 31 Balance

Work in Process Inventory


3,200 May 31
10,500
12,800
10,240
28,280

Job
No.

Beginning Work
In Process

430
431

$1,200
0
$1,200

8,460

Job Cost Sheets


Direct
Direct Manufacturing*
Material Labour
Overhead
$3,600
4,400
$8,000

$3,000
7,600
$10,600

$2,400
6,080
$8,480

EXERCISE 3-15
(a) 1.

Total
$10,200
18,080
$28,280

*Direct labour .80

$14,125, or ($3,925 + $6,000 + $4,200).

2. Last year 70%, or ($4,200 $6,000); this year 75% (either $6,375 $8,500
or $3,000 $4,000).
(b) Jan. 31

Work in Process Inventory(6,600+2,000).


Raw Materials Inventory....................

8,000

31

Work in Process Inventory (8,500+4,000)


Factory Labour...................................

12,500

31

Work in Process Inventory(12,500x75%).


Manufacturing Overhead...................

9,375

31

Finished Goods Inventory.........................


Work in Process Inventory................

44,000

8,000
12,500
9,375
44,000

EXERCISE 3-16
(a) + $50,000 + $37,500 = $135,650
(a) = $48,150
$135,650 + (b) = $211,500
(b) = $75,850
$211,500 (c) = $193,200
(c) = $18,300
[Note:The instructions indicate that manufacturing overhead is applied on the basis
of direct labour cost, and the rate is the same in all cases. From Case A,
a student should note the overhead rate to be 75%, or ($37,500 $50,000).]
(d) = .75 $120,000
(d) = $90,000
$78,000 + $120,000 + $90,000 = (e)
(e) = $288,000
$288,000 + $15,500 = (f)
(f) = $303,500
$303,500 $11,800 = (g)
(g) = $291,700
[Note:(h) and (i) are solved together.]
(i) = .75(h)
$72,600 + (h) + .75(h) = $212,600
1.85(h) = $140,000
(h) = $80,000
(i) = $60,000
(j) = $212,600 + $23,000
(j) = $235,600
$235,600 (k) = $222,000
(k) = $13,600

EXERCISE 3-17
(a) $2.32 per machine hour ($290,000 125,000).
(b) ($295,000) ($2.32 130,000 machine hours)
$295,000 $301,600 = $6,600 over-applied
(c) Manufacturing Overhead...........................................
Cost of Goods Sold...........................................

6,600

6,600

EXERCISE 3-18
(a) The source documents are:
Direct materialsMaterials requisition slips.
Direct labourTime tickets.
Manufacturing overheadPredetermined overhead rate.
(b) The predetermined overhead rate is 140% of direct labour cost. For example,
on July 15, the computation is $560 $400 = 140%. The same result is
obtained on July 22 and 31.
(c) The total cost is:
Direct materials.............................................................
Direct labour..................................................................
Manufacturing overhead...............................................
The unit cost is $3.91 ($7,825 2,000).
(d) July 31

Finished Goods Inventory.............................


Work in Process Inventory....................

7,825

$4,825
1,250
1,750
$7,825

7,825

EXERCISE 3-19
Work in Process Inventory.................................................
Raw Materials Inventory.............................................

2,670

Work in Process Inventory.................................................


Factory Labour............................................................

1,120

2,670
1,120

EXERCISE 3-19 (Continued)


Manufacturing Overhead............................................
Various Accounts......................................

890

Work in Process Inventory.........................................


Manufacturing Overhead...........................

910

890
910

EXERCISE 3-20
1.

Raw Materials Inventory.........................................


Accounts Payable............................................

192,000

Factory Labour........................................................
Factory Wages Payable...................................

91,500

Work in Process Inventory.....................................


Manufacturing Overhead........................................
Raw Materials Inventory..................................

153,530
4,470

Work in Process Inventory.....................................


Manufacturing Overhead........................................
Factory Labour................................................

84,000
7,500

3.

Manufacturing Overhead........................................
Accounts Payable............................................

59,500

4.

Manufacturing Overhead........................................
Accumulated DepreciationMachinery &
Equipment....................................................

14,550

Work in Process Inventory.....................................


Manufacturing Overhead.................................
(80% $84,000)

67,200

2.

5.

192,000
91,500

158,000

91,500
59,500

14,550
67,200

6.

Finished Goods Inventory......................................


Work in Process Inventory..............................

238,030

238,030

Computation of cost of jobs finished:


Job
A20
A21
A23

Direct
Materials
$33,240
42,920
41,270

Direct
Labour
$18,000
24,000
25,000

Manufacturing
Overhead
$14,400
19,200
20,000

Total
$65,640
86,120
86,270
$238,030

EXERCISE 3-21
(a)

HANNIFAN MANUFACTURING COMPANY


Cost of Goods Manufactured Schedule
For the Month Ended May 31, 2012
Work in process, May 1.........................................
Direct materials used.............................................
Direct labour...........................................................
Manufacturing overhead applied..........................
Total manufacturing costs.............................
Total cost of work in process................................
Less: Work in process, May 31............................
Cost of goods manufactured................................

(b)

$54,200
32,000
40,000

$17,400

126,200
143,600
17,900
$125,700

HANNIFAN MANUFACTURING COMPANY


(Partial) Income Statement
For the Month Ended May 31, 2012
Sales....................................................................
Cost of goods sold
Finished goods, May 1................................
Cost of goods manufactured.....................
Cost of goods available for sale................
Less: Finished goods, May 31..................

$200,000
$12,600
125,700
138,300
15,400

Cost of goods sold..............................


Gross profit.........................................................
EXERCISE 3-21 (Continued)

122,900
$77,100

(c) In the May 31 balance sheet, the manufacturing inventories will be


reported in current assets as follows:
Finished goods....................................................
$15,400
Work in process...................................................
17,900
Raw materials.......................................................
7,100

EXERCISE 3-22
(a) Work in Process Inventory
April 30
$10,600 (#10: $6,500 + #11: $4,100)
May 31
$18,100 (#11: $4,100 + $3,900 + #13: $4,700 + #14: $5,400)
June 30 $ 9,000 (#14, $5,400 + $3,600)
(b) Finished Goods Inventory
April 30
$1,200 (#12)
May 31
$10,900 (#10)
June 30 $19,100 (#11, $11,000 + #13, $8,100)
(c) Gross Profit
Month

Job
Number

Sales
(25% above

Cost of
Goods Sold

Gross
Profit

$1,200
10,900
19,100

$ 300
2,725
4,775

cost)

May
June
July

12
10
11/13

$1,500
13,625
23,875

EXERCISE 3-23
(a)

Supplies.............................................
Accounts Payable................

1,500

Work in Process................................
Operating Overhead..........................
Supplies................................

700
300

1,500

1,000

EXERCISE 3-23(Continued)

Work in Process................................
Operating Overhead..........................
Salaries Payable..................

41,250
13,750

Operating Overhead..........................
Cash......................................

30,000

Work in Process ($41,250 80%).....


Operating Overhead............

33,000

Cost of Completed Work...................


Work in Process..................

70,000

(b)

2.
3.

Work in Process
700
70,000
41,250

55,000

30,000

33,000

70,000

(6)

5.

33,000
4,950

EXERCISE 3-24
(a)

Koppel
Direct materials
$ 700
Auditor labour costs
5,400
Applied overhead
4,320
Total cost
$10,420

Dupont
$ 400
6,600
5,400
$12,400

Rojas
$ 250
3,375
2,400
$6,025

TOTAL

12,120

(b) The Koppel job is the only incomplete job, therefore, $10,420.
(c) Actual overhead
Applied overhead
Balance

$12,000 (DR)
12,120 (CR)
$ 120 (CR) Over-applied

EXERCISE 3-25
(a) Predetermined overhead rate = Estimated overhead Estimated
decorator hours
= $840,000 40,000 decorator hours
= $21 per decorator hour

(b) Work in Process (41,500 hrs $21).....................871,500


Operating Overhead................................
(c)

Actual overhead
Applied overhead
Balance

871,500

$861,000
871,500
$ 10,500 Over-applied

Problems:SetA
Calculatethe P326ATheconsultingfirmCMAFinancialemploys40fulltimestaff.Theestimatedcompensationper
predetermine
employeeis$105,000for1,750hours.Itchargesalldirectlabourcoststoclients.Itincludesanyother
doverhead
costsinasingleindirectcostpoolandallocatesthembasedonlabourhours.Actualindirectcostswere
rateandjob
$850,000.Estimatedindirectcostsforthecomingyearare$1,400,000.Thefirmexpectstohave60
costsfora
clientsinthecomingyear.
service
Instructions
organization.
(a)Determineoverheadrateperdirectlabourhour.
(b)Determinethedirectlabourrateperhour.
(c)Calculatethetotalcostofajobthatwilltake270directlabourhours,usinganormalcostsystem.
Prepare P327ABertrandManufacturingusesajobordercostsystemandappliesoverheadtoproductiononthebasisof
entriesin
directlabourcosts.OnJanuary1,2012,JobNo.50wastheonlyjobinprocess.Thecostsincurredpriorto
ajob
January1onthisjobwereasfollows:directmaterials$30,000,directlabour$15,000,andmanufacturing
ordercost
overhead$20,000.AsofJanuary1,JobNo.49hadbeencompletedatacostof$120,000andwaspartof
system
finishedgoodsinventory.Therewasa$25,000balanceintheRawMaterialsInventoryaccount.
andjob
DuringthemonthofJanuary,BertrandManufacturingbeganproductiononJobs51and52,andcompleted
cost
Jobs50and51.Jobs49and50werealsosoldonaccountduringthemonthfor$152,000and$198,000,
sheets.
respectively.Thefollowingadditionaleventsoccurredduringthemonth:
1. Bertrandpurchasedadditionalrawmaterialsof$100,000onaccount.


2.

3.

Itincurredfactorylabourcostsof$75,000.Ofthisamount,$18,000relatedtoemployerpayroll
taxes.
Itincurredmanufacturingoverheadcostsasfollows:indirectmaterials$18,000,indirectlabour
$17,000,depreciationexpense$14,000,andvariousothermanufacturingoverheadcostsonaccount
$22,000.
4. Itassigneddirectmaterialsanddirectlabourtojobsasfollows:

JobNo.
DirectMaterials
DirectLabour
50

$12,000

$7,000

51

42,000

28,000

52

35,000

22,000

Instructions
(a)Calculatethepredeterminedoverheadratefor2012,assumingBertrandManufacturingestimatestotal
manufacturingoverheadcostsof$1,500,000,directlabourcostsof$750,000,anddirectlabourhoursof
20,000fortheyear.
(b)OpenjobcostsheetsforJobs50,51,and52.EntertheJanuary1balancesonthejobcostsheetforJob
No.50.
(c)Preparethejournalentriestorecordthepurchaseofrawmaterials,thefactorylabourcostsincurred,and
themanufacturingoverheadcostsincurredduringthemonthofJanuary.
(d)Preparethejournalentriestorecordtheassignmentofdirectmaterials,directlabour,andmanufacturing
overheadcoststoproduction.Inassigningmanufacturingoverheadcosts,usetheoverheadrate
calculatedin(a).Postallcoststothejobcostsheetsasnecessary.
(e)Totalthejobcostsheetsforanyjob(s)completedduringthemonth.Preparethejournalentry(orentries)
torecordthecompletionofanyjob(s)duringthemonth.
(f)Preparethejournalentry(orentries)torecordthesaleofanyjob(s)duringthemonth.
(g)CalculatethebalanceintheFinishedGoodsInventoryaccountattheendofthemonth.Whatdoesthis
balanceconsistof?
(h)Calculatetheamountofunderoroverappliedoverhead.
Prepare P328AFortheyearendedDecember31,2012,thejobcostsheetsofDeVoeCompanycontainedthefollowingdata:
entriesin
Job
Direct
Direct
Manufacturing
Total
ajob
Number
Explanation
Materials
Labour
Overhead
Costs
ordercost
system
7640
Balance1/1
$25,000
$24,000
$28,800
$77,800
and

Currentyear's
30,000
36,000
43,200
109,200
partial
costs
income
statement.
7641
Balance1/1
11,000
18,000
21,600
50,600

Currentyear's
costs

43,000

48,000

57,600

148,600

7642

Currentyear's
costs

48,000

55,000

66,000

169,000

Otherdata:
1. Rawmaterialsinventorytotalled$15,000onJanuary1.Duringtheyear,$140,000ofrawmaterials
werepurchasedonaccount.
2. FinishedgoodsonJanuary1consistedofJobNo.7638for$87,000andJobNo.7639for$92,000.

3.

4.

5.

6.

JobNo.7640andJobNo.7641werecompletedduringtheyear.
JobNos.7638,7639,and7641weresoldonaccountfor$530,000.
Manufacturingoverheadincurredonaccounttotalled$120,000.
Othermanufacturingoverheadconsistedofindirectmaterials$14,000,indirectlabour$20,000,and
depreciationonfactorymachinery$8,000.

Instructions
(a)ProvetheagreementofWorkinProcessInventorywithjobcostsheetspertainingtounfinished
work.Hint:UseasingleTaccountforWorkinProcessInventory.Calculateeachofthefollowing,then
posteachtotheTaccount:
1.

2.

3.

4.

5.

beginningbalance
directmaterials
directlabour
manufacturingoverhead
completedjobs

(b)Preparetheadjustingentryformanufacturingoverhead,assumingthebalanceisallocatedentirelyto
CostofGoodsSold.
(c)Determinethegrossprofittobereportedfor2012.

Prepare
P329AEnosInc.isaconstructioncompanyspecializingincustompatios.Thepatiosareconstructedof
entriesina
concrete,brick,fibreglass,andlumber,dependingoncustomerpreference.OnJune1,2012,thegeneral
jobordercost
ledgerforEnosInc.containsthefollowingdata:
systemanda
RawMaterialsInventory
$4,200 WorkinProcessInventory
5,540
costofgoods
manufactured
ManufacturingOverheadApplied
32,640 ManufacturingOverheadIncurred
31,650
schedule.
SubsidiarydataforWorkinProcessInventoryonJune1areasfollows:
JobCostSheets

Customer

JobCostSheets
CostElement

Fowler

Haines

Krantz

$600

$800

$900

Directlabour

320

540

580

Manufacturingoverhead

400

675

725

$1,320

$2,015

$2,205

Directmaterials

DuringJune,rawmaterialspurchasedonaccountwere$3,900,andallwageswerepaid.Additional
overheadcostsconsistedofdepreciationonequipmentof$700andmiscellaneouscostsof$400incurred
onaccount.
AsummaryofmaterialsrequisitionslipsandtimeticketsforJuneshowsthefollowing:
CustomerJob

MaterialsRequisitionSlips

TimeTickets

Fowler

$800

$450

Farkas

2,000

800

Haines

500

360

Krantz

1,300

1,600

Fowler

300

390

$4,900

$3,600

1,500

1,200

$6,400

$4,800

Generaluse

Overheadwaschargedtojobsatthesamerateof$1.25perdollarofdirectlabourcost.Thepatiosfor
customersFowler,Haines,andKrantzwerecompletedduringJuneandsoldforatotalof$18,900.Each
customerpaidinfull.

Instructions
(a)JournalizetheJunetransactionsforthefollowing:
1.

2.

3.

purchaseofrawmaterials,factorylabourcostsincurred,andmanufacturingoverheadcosts
incurred
assignmentofdirectmaterials,labour,andoverheadtoproduction
completionofjobsandsaleofgoods

(b)PosttheentriestoWorkinProcessInventory.
(c)ReconcilethebalanceinWorkinProcessInventorywiththecostsofunfinishedjobs.
(d)PrepareacostofgoodsmanufacturedscheduleforJune.
Calculatethe P330ANicoleLimitedisacompanythatproducesmachinerytocustomerorders,usinganormaljobordercost
predetermine
system.Itappliesmanufacturingoverheadtoproductionusingapredeterminedrate.Thisoverheadrate
doverhead
issetatthebeginningofeachfiscalyearbyforecastingtheyear'soverheadandrelatingittodirect
rateand
labourcosts.Thebudgetfor2012wasasfollows:
prorationof
Directlabour
$1,800,000
overhead.

Manufacturingoverhead

900,000

Asattheendoftheyear,twojobswereincomplete.Thesewere1768B,withtotaldirectlabourcharges
of$110,000,and1819C,withtotaldirectlabourchargesof$390,000.Onthesejobs,machinehours
were287hoursfor1768Band647hoursfor1819C.Directmaterialsissuedfor1768Bamountedto
$220,000,andfor1819Ctheyamountedto$420,000.
TotalchargestotheManufacturingOverheadControlaccountfortheyearwere$897,000,anddirect
labourchargesmadetoalljobsamountedto$1,583,600,representing247,216directlabourhours.
Therewerenobeginninginventories.Inadditiontotheendingworkinprocessjustdescribed,the
endingfinishedgoodsinventoryaccountshowedabalanceof$720,000.
Salesfortheyearamountedto$6,201,355;costofgoodssoldtotalled$3,935,000;andsales,general,
andadministrativeexpenseswere$1,857,870.
Theaboveamountsforinventoriesandthecostofgoodssoldhavenotbeenadjustedforanyoveror
underapplicationofmanufacturingoverheadtoproduction.Itisthecompany'spracticetoallocateany
overorunderappliedoverheadtoinventoriesandthecostofgoodssold.

Instructions
(a)Calculatetheunderoroverappliedmanufacturingoverheadfor2012.
(b)Proratetheamountcalculatedin(a)basedontheendingbalances(beforeprorating)ofWorkin
Process,FinishedGoods,andCostofGoodsSold.
(c)Prepareanincomestatementforthecompanyfortheyear.Theincometaxrateis40%.
(adaptedfromCMACanada)

Analyzeajob P331AOnNovember30,2012,therewasafireinthefactoryofAbleManufacturingLimited,whereyouwork
ordercost
asthecontroller.Theworkinprocessinventorywascompletelydestroyed,butboththematerialsand
systemand
finishedgoodsinventorywereundamaged.
calculatework
AbleusesnormaljobordercostinganditsfiscalyearendisDecember31.Selectedinformationforthe
inprocess.
periodsendedOctober31,2012,andNovember30,2012,follows:

October31,2012

November30,2012

$79,250

$73,250

Workinprocessinventory

58,875

Finishedgoodsinventory

60,000

63,000

576,000

656,000

17,960

53,540

129,500

163,300

$128,700

$60,000

83,500

Indirectmaterialsused

5,848

Overappliedoverhead(duringNovemberonly)

2,750

Supplies(includingbothdirectandindirectmaterials)

Costofgoodssold(yeartodate)
Accountspayable(relatestomaterialspurchasedonly)
Manufacturingoverheadincurred(yeartodate)
Manufacturingoverheadapplied
OtherinformationforNovember2012:
Cashpaymentstosuppliers
Payroll(including$15,375indirect)

Instructions
Calculatethenormalcostoftheworkinprocessinventorylostduringthefire.
(adaptedfromCGACanada)

PrepareT
P332AInformationforMeritManufacturingLtd.atMay1,2012,isgivenbelow:
accountsina
Inventories:
comprehensive
manufacturing
Rawmaterials(alldirect)
jobordercost

$3,500

systemand
compare
process
costing.

Workinprocess

2,040

Finishedgoods

2,890

TransactionsinMay2012:
1.

2.

3.

4.

5.

6.

7.

8.

Purchased$22,400ofdirectmaterialsonaccount.
Transferred$18,800ofdirectmaterialsintoproduction.
Productionwagestotalled$6,500,ofwhichdirectlabouraccountedfor$5,000.
ThesalaryinMayfortheproductionsupervisorwas$3,000.
Thetotalutilitycostwas$520,ofwhich$410wasvariableand$110wasfixed.
Transferred$1,300ofindirectmaterialfromfactorysuppliesintoproduction.
DepreciationonfactoryassetsforMaywas$22,500.
Amortizationofprepaidinsuranceonfactoryassetswas$1,600.

Otherinformation:
i. Thecompanytransfersactualoverheadcostsduringeachmonthtotheworkinprocess
inventoryaccount.Itusesseparateaccountstorecordtheincurrenceoffixedandvariable
overhead.
ii. DuringMay,goodswithavalueof$52,450werecompletedandtransferredtofinishedgoods.
iii. DuringMay,finishedgoodswithavalueof$51,315weresoldonaccountfor$74,670.

Instructions
(a)UsingTaccounts,showtheflowofcostsintoandoutoftheFactoryOverhead,Inventory,andCost
ofGoodsSoldaccountsforthemonthofMay.Alsocalculatethevalueofeachofthematerials,
workinprocess,andfinishedgoodsinventoriesattheendofMay2012.Besuretouseseparate
accountsasnecessary.
(b)Nameanindustryorproductforwhichjobordercostingwouldbeappropriateandoneforwhich
processcostingwouldbeappropriate.Identifyfourdifferencesbetweentheproductionprocesses
forjoborderandprocesscosting.
(adaptedfromCGACanada)

Prepare
P333ARedFireInc.producesfiretrucks.Thecompanyusesanormaljobordercostingsystemtocomputeits
entriesand
costofgoodsmanufactured.Thecompany'spolicyistopriceitsjobatcostplus30%markup.On
closeout
January1,2012therewasonlyonejobinprocesswiththefollowingcosts:
underor

Job200
overapplied
overhead
Directmaterials
$13,500
Directlabour

$18,000

Appliedoverhead

$27,000

Total

$58,500

ThefollowingbalancesweretakenfromthegeneralledgerofthecompanyasofJanuary1,2012:
Directmaterialsinventory

$45,000

Finishedgoodsinventory(forJob100)

$85,000

Duringtheyear2012,thefollowingeventsoccurred:
Directmaterialswerepurchasedonaccountfor$375,000
Twomorejobswerestarted:Job300andJob400.Directmaterialsanddirectlabourcostsincurredby
eachjobinprocessduringtheyear2012areasfollows:

Job200

Job300

Job400

Directmaterials

$150,000

$45,000

$35,000

Directlabour

$130,000

$45,000

$25,000

Thecompanyincurredthefollowingactualfactoryoverheadduringtheyear:
Factoryrent

$135,000

Factorysupplies

$55,500

Indirectlabour

$85,750

Jobs200and300werecompleted.
Jobs100and200weresold.

Instructions
(a)Calculatethetotalappliedoverheadfortheyear2012.Thefactoryoverheadcostsareappliedto
eachjobonthebasisofdirectlabourdollars.
(b)Preparesimplejobordercostsheetsforjobs200,300and400fortheyearendedDecember31,
2012.
(c)Determinewhethertheoverheadisoverappliedorunderapplied.Byhowmuch?
(d)PrepareascheduleofCostofGoodsSold,identifyingbothnormalandadjustedcostofgoodssold,

fortheyearendedDecember31,2012.
(e)ComputethesellingpriceofJob200.
(f)ComputetheendingbalancesasofDecember31,2012,forthefollowingaccounts:directmaterials
andworkinprocess.

Analyze
P334AVargasCorporation'sfiscalyearendsonJune30.Thefollowingaccountsarefoundinitsjobordercost
manufacturing
accountingsystemforthefirstmonthofthenewfiscalyear:
accountsand
RawMaterialsInventory
determine
missing
July1 Beginningbalance
15,000
July31Requisitions
(a)
amounts.
31 Purchases
90,400

July31 Endingbalance

(b)

WorkinProcessInventory
July1 Beginningbalance

(c)

July31Jobscompleted

(f)

31 Directmaterials

75,000

31 Directlabour

(d)

31 Overhead

(e)

July31 Endingbalance

(g)

FinishedGoodsInventory
July1 Beginningbalance

(h)

July31Costofgoodssold

(j)

31 Completedjobs

(i)

July31 Endingbalance

(k)

FactoryLabour
July31 Factorywages

(l)

July31Wagesassigned

(m)

ManufacturingOverhead
July31 Indirectmaterials

9,000

July31Overheadapplied

114,000

31 Indirectlabour

16,000

31 Otheroverhead

(n)

Otherdata:
OnJuly1,twojobswereinprocess:JobNo.4085andJobNo.4086,withcostsof$19,000and
$13,200,respectively.
DuringJuly,JobNos.4087,4088,and4089werestarted.OnJuly31,onlyJobNo.4089was
unfinished.Thisjobhadchargesfordirectmaterialsof$2,000anddirectlabourof$1,500,plus
manufacturingoverhead.Manufacturingoverheadwasappliedattherateof125%ofdirect
labourcost.
3. OnJuly1,JobNo.4084,costing$145,000,wasinthefinishedgoodswarehouse.OnJuly31,
JobNo.4088,costing$138,000,wasinfinishedgoods.
4. Overheadwas$3,000underappliedinJuly.

1.

2.

Instructions
Listtheletters(a)through(n)andindicatetheamountpertainingtoeachletter.Showcalculations.

SOLUTIONS TO PROBLEMS: SET A


PROBLEM 3-26A

(a) Total estimated indirect costs


Estimated direct labour hours
(40 employees 1,750 hours per employee)
Overhead rate per direct labour hour
(b) Total estimated labour costs per employee
Estimated direct labour hours per employee
Direct labour rate per hour

(c) Total cost per hour ($20.00 + $60.00)


Total number of direct labour hours
Total cost of the job (rounded)

$1,400,000
70,000
$ 20.00
$ 105,000
1,750
$ 60.00

$ 80.00
270
$21,600

PROBLEM 3-27A
(a) $1,500,000 $750,000 direct labour costs = 200% of direct labour costs
(b) See solution to part (e) for job cost sheets
(c) Raw Materials Inventory............................................. 100,000
Accounts Payable................................................
Factory Labour............................................................
Factory Wages Payable.......................................
Employer Payroll Taxes Payable........................

75,000

Manufacturing Overhead............................................
Accounts Payable................................................
Accumulated Depreciation.................................
Raw Materials Inventory......................................
Factory Labour....................................................

71,000

(d) Work in Process Inventory.........................................


Raw Materials Inventory......................................
($12,000 + $42,000 + $35,000)

89,000

Work in Process Inventory.........................................


Factory Labour....................................................
($7,000 + $28,000 + $22,000)

57,000

Work in Process Inventory......................................... 114,000


Manufacturing Overhead....................................
($57,000 200% of direct labour costs)
(e) See next page for postings to job cost sheets.

100,000
57,000
18,000
22,000
14,000
18,000
17,000
89,000

57,000

114,000

PROBLEM 3-27A (Continued)


(b)&(e)
Job Cost Sheets
Job No. 50
Date
Direct Materials
Direct
Manufacturing Overhead
Labour
Beg.
$30,000
$15,000
*$20,000*
Jan.
12,000
7,000
* 14,000*
$42,000
$22,000
*$34,000*
Cost of completed job
Direct materials...............................................................
Direct labour....................................................................
Manufacturing overhead.................................................
Total cost.................................................................................

$42,000
22,000
34,000
$98,000

*$7,000 200%
Job No. 51
Date
Direct Materials
Jan.

$42,000
$42,000

Direct
Labour
$28,000
$28,000

Manufacturing Overhead
**$56,000**
**$56,000**

Cost of completed job


Direct materials................................................................ $ 42,000
Direct labour.................................................................... 28,000
Manufacturing overhead.................................................
56,000
Total cost................................................................................. $126,000
**$28,000 200%
Job No. 52
Date
Direct Materials
Jan.
$35,000
***$22,000 200%

Direct
Labour
$22,000

Manufacturing Overhead
***$44,000***

PROBLEM 3-27A (Continued)

(f)

(g)

Finished Goods Inventory.......................................


Work in Process Inventory...............................
($98,000 + $126,000)

224,000

Cost of Goods Sold..................................................


Finished Goods Inventory................................
($120,000 + $98,000)

218,000

Accounts Receivable...............................................
Sales..................................................................
($152,000 + $198,000)

350,000

Finished
Goods Inventory
Beginning balance
120,000 218,000
Cost of completed jobs 50 and 51 224,000
Ending balance
126,000

224,000

218,000

350,000

Cost of jobs 49 and 50 sold

The balance in this account consists of the cost of completed Job No. 51
which has not yet been sold.
(h) Manufacturing Overhead
Actual
Applied
71,000
114,000
43,000
The balance indicates that manufacturing overhead was over-applied by
$43,000.

PROBLEM 3-28A

(a)

1/1

12/31

Work in Process Inventory


Balance (1)
128,400 Completed work (5) (c)
Direct materials (2)
121,000
Direct labour (3)
139,000
Manufacturing overhead (4) 166,800
Balance
169,000

386,200

(1)

Job 7640
Job 7641

$77,800
50,600
$128,400

(3)

Job 7640
Job 7641
Job 7642

$36,000
48,000
55,000
$139,000

(2)

Job 7640
Job 7641
Job 7642

$30,000
43,000
48,000
$121,000

(4)

Job 7640
Job 7641
Job 7642

$43,200
57,600
66,000
$166,800

(5)

Job 7640
Beginning balance..................................................
Direct materials......................................................
Direct labour...........................................................
Manufacturing overhead........................................
Job 7641
Beginning balance..................................................
Direct materials......................................................
Direct labour...........................................................
Manufacturing overhead........................................
Total cost of completed work
Job 7640..................................................................
Job 7641..................................................................

$77,800
30,000
36,000
43,200
$187,000
$50,600
43,000
48,000
57,600
$199,200
$187,000
199,200
$386,200

Work in process balance..............................................


Unfinished job No. 7642................................................
*Current years cost
Direct materials.................................
Direct labour......................................
Manufacturing overhead..................

$169,000
$169,000*

$48,000
55,000
66,000
$169,000

(b) Actual overhead costs


Incurred on account...............................................
Indirect materials...................................................
Indirect labour........................................................
Depreciation...........................................................
Applied overhead costs
Job 7640..................................................................
Job 7641..................................................................
Job 7642..................................................................
Actual overhead.............................................................
Applied overhead...........................................................
Over-applied overhead..................................................
Manufacturing Overhead............................................... 4,800
Cost of Goods Sold................................................
(c) Sales (given)........................................................
Cost of goods sold
Job 7638....................................................
Job 7639....................................................
Job 7641....................................................
Less: Over-applied overhead............................
Gross profit.........................................................

$120,000
14,000
20,000
8,000
$162,000
$ 43,200
57,600
66,000
$166,800
$162,000
166,800
$ 4,800
4,800
$530,000

$87,000
92,000
199,200
378,200
4,800

373,400
$156,600

PROBLEM 3-29A
(a)
(1) Raw Materials Inventory.............................................
Accounts Payable...............................................

3,900

Factory Labour............................................................
Cash.....................................................................

4,800

Manufacturing Overhead...........................................
Accumulated DepreciationEquipment...........
Accounts Payable...............................................

1,100

(2) Work in Process Inventory.........................................


Manufacturing Overhead...........................................
Raw Materials Inventory.....................................

4,900
1,500

Work in Process Inventory.........................................


Manufacturing Overhead...........................................
Factory Labour....................................................

3,600
1,200

Work in Process Inventory ($3,600 1.25)...............


Manufacturing Overhead....................................

4,500

(3) Finished Goods Inventory.........................................


Work in Process Inventory.................................

14,740

Job
Fowler
Haines
Krantz

Direct
Materials

Direct
Labour

Manufacturing
Overhead*

Total
Costs

$1,700
1,300
2,200

$1,160
900
2,180

$1,450
1,125
2,725

$4,310
3,325
7,105
$14,740

*125% direct labour amount

Cash.............................................................................
Sales.....................................................................

18,900

Cost of Goods Sold....................................................


Finished Goods Inventory..................................

14,740

3,900
4,800
700
400

6,400

4,800
4,500
14,740

18,900
14,740

PROBLEM 3-29A (Continued)


(b)

6/1

6/30

Work in Process Inventory


Balance
5,540 June Completed work
Direct materials
4,900
Direct labour
3,600
Overhead applied
4,500
Balance
3,800

14,740

(c) Work in Process Inventory.........................................................

$3,800

Job: Farkas (Direct materials $2,000 + Direct labour $800 +


Manufacturing overhead $1,000(800x1.25)).................

$3,800

(d)

ENOS INC.
Cost of Goods Manufactured Schedule
For the Month Ended June 30, 2012
Work in process, June 1...........................................
Direct materials used................................................
Direct labour..............................................................
Manufacturing overhead applied.............................
Total manufacturing costs................................
Total cost of work in process...................................
Less: Work in process, June 30..............................
Cost of goods manufactured...................................

$4,900
3,600
4,500

$5,540

13,000
18,540
3,800
$14,740

PROBLEM 3-30A

(a)

Overhead rate = $900,000 $1,800,000 = 50% of each labour $


Now calculate under- or over-applied overhead for the year.
Actual Overhead(given)
Overhead applied($1,583,600 50%)
Under-applied overhead

$897,000
791,800
$105,200

(b) To prorate the over-applied overhead we need


the ending balances in WIP and Finished Goods
Inventories and the Cost of Goods Sold.
%
Cost of goods sold (given)
Finished goods inventory
(given)
WIP inventory (see below)
Total

$3,935,00
0
720,000
1,390,00
0
$6,045,00
0

65.10% $ 68,485
12,53
11.91%
0
24,18
22.99%
5

Ending Work in process


inventory:

Direct materials
Direct labour
Manufacturing
overhead*

1768B
1819C
Total
$220,00
$
0
420,000 $ 640,000
110,00
0
390,000
500,000
55,00
195,00
250,00
0
0
0
$385,00 $1,005,00
0
0 $1,390,000

* Direct labour amount 50% overhead


rate

Allocatio
n

$105,200

PROBLEM 3-30A (Continued)


(c) First adjust cost of goods sold for prorated under-applied
overhead.
(1) Cost of goods sold
Plus: under-applied overhead
Adjusted cost of goods sold

$3,935,000
68,485
$4,003,485

NICOLE LIMITED
Income Statement
for the year 2012
Sales
Less: Adjusted cost of goods sold (1)
Gross profit
Less: Operating expenses
Net income before taxes
Taxes at 40%
Net income

$6,201,355
4,003,485
2,197,870
1,857,870
340,000
136,000
$ 204,000

PROBLEM 3-31A
Direct materials used:
Beginning inventory
Plus: purchases
Total available for use
Less: ending inventory
Used in production
Less: indirect materials
Direct materials used
(1)

Materials purchased:
Account payable, ending
Plus: cash payments
Less: Accounts payable, beginning
Materials purchased

$79,250
95,580 (1)
174,830
73,250
101,580
5,848
$95,732

$53,540
60,000
113,540
17,960
$95,580

Direct labour:
Total Payroll
Less: indirect labour
Direct labour used

$83,500
15,375
$68,125

Manufacturing overhead applied:


Overhead, Nov 30
Overhead, Nov 1
Overhead incurred during the month
Plus: over-applied overhead
Manufacturing overhead applied

$163,300
129,500
33,800
2,750
$ 36,550

PROBLEM 3-31A (Continued)


Cost of goods sold:
Balance Nov 30
Balance Nov 1
Cost of goods sold for the month

$656,000
576,000
$ 80,000

Cost of completed goods:


Finished goods, Nov 30
Plus: cost of goods sold
Goods available for sale
Less: finished goods, Nov 1
Cost of completed goods:

$63,000
80,000
143,000
60,000
$83,000

Ending work in process:


Beginning work in process
Plus: Direct materials used
Direct labour
Manufacturing overhead applied
Total manufacturing cost for the month
Less: completed goods transferred out
Ending work in process

$ 58,875
95,732
68,125
36,550
259,282
83,000
$176,282

PROBLEM 3-32A
(a)
Raw Materials Inventory
Beg Bal
3,500
(1) 22,400
End Bal
7,100

18,800 (2)

Finished Goods Inventory


Beg Bal
2,890
(ii) 52,450
End Bal
4,025

51,315 (iii)

Variable Factory Overhead


(3)
(5)
(6)
End Bal

1,500
410
1,300*
--

3,210 (i)
--

Supplies not raw materials

Work in Process Inventory


Beg Bal
(2)
(3)
(i)
End Bal

2,040
18,800
5,000
30,420
3,810

52,450 (ii)

Cost of Goods Sold

(iii)

51,315

Fixed Factory Overhead


(4)
(5)
(7)
(8)
End Bal

3,000
110
22,500
1,600
--

27,210 (i)
--

(b)

1
2
3
4

Job Order Costing


Custom furniture shop

Process Costing
Paint producer

Unique differentiated products


Large number of separate operations
Labour intensive
Products made to customer order

All output the same or very similar


Continuous operations
Highly automated
Standard output made for inventory

PROBLEM 3-33A
(a) Applied overhead rate (from Job 200) = $27,000 $18,000 = 150%
Direct labour costs incurred: $130,000 + $45,000 + $25,000 = $200,000
MOH applied = $200,000 1.5 = $300,000.
(b)

Job No. 200


Date
Direct
Materials
1/1
$ 13,500
Year
150,000
$163,500

Direct
Labour
$ 18,000
130,000
$148,000

Manufacturing
Overhead
$ 27,000
195,000
$222,000

Cost of completed job


Direct materials................................................................
Direct labour....................................................................
Manufacturing overhead.................................................
Total cost
Job No. 300
Date
Direct
Materials
1/1
Year
$45,000
$45,000

Direct
Labour

Manufacturing
Overhead

$45,000
$45,000

$67,500
$67,500

Cost of completed job


Direct materials................................................................
Direct labour....................................................................
Manufacturing overhead.................................................
Total cost

$163,500
148,000
222,000
$533,500

$45,000
45,000
67,500
$157,500

PROBLEM 3-33A (Continued)


Job No. 400
Date
Direct
Materials
1/1
Year
$35,000
$35,000

Direct
Labour

Manufacturing
Overhead

$25,000
$25,000

$37,500
$37,500

Cost of completed job


Direct materials................................................................
Direct labour....................................................................
Manufacturing overhead.................................................
Total cost
(c)

(d)

Manufacturing overhead applied:


Overhead incurred during the month
Manufacturing overhead applied
Over-applied overhead

$35,000
25,000
37,500
$97,500

$276,250
300,000
$ 23,750

RED FIRE INC.


Statement of Cost of Goods Sold
For the Year Ended December 31, 2012
Finished goods inventory, January 1................
Cost of goods manufactured*..........................
Cost of goods available for sale........................
Less: Finished goods, December 31**.............
Unadjusted Cost of goods sold***.....................
Less: Over-applied overhead............................
Adjusted cost of goods sold..............................
*Job #200, $533,500 + Job #300, $157,500
**Job #300, $157,500
***Job #100, $85,000 + Job #200, $533,500

$85,000
691,000
776,000
157,500
618,500
23,750
$594,750

PROBLEM 3-33A (Continued)


(e)
(f)

Selling price of Job 200: $533,500 1.30 = $693,550


Ending balance in direct materials inventory:
Balance, January 1
Plus: purchases
Direct material available for use
Less: materials used in production
Balance, December 31
Ending balance in work-in-process inventory:
Balance, January 1.....................................
Plus: Manufacturing costs during the month:
Direct materials.................................. $230,000
Direct labour........................................
200,000
Applied manufacturing overhead.
300,000
Total cost of work-in-process....................
Less: cost of goods manufactured..........
Balance, December 31(Job 400)................

$ 45,000
375,000
420,000
230,000
$190,000

$ 58,500

730,000
788,500
691,000
$ 97,500

PROBLEM 3-34A
Note: Some letters cannot be determined until subsequent letters are solved.
(a) $84,000

($75,000 + $9,000).

(b) $21,400

($15,000 + $90,400 $84,000).

(c) $32,200

($19,000 + $13,200).

(d) $91,200

($114,000 125%).

(e) $114,000 (Given in Manufacturing Overhead account)


(f)

$307,025 ($32,200 + $75,000 + $91,200 + $114,000 $5,375).

(g) $5,375

[$2,000 + $1,500 + ($1,500 1.25)].

(h) $145,000 (Given in other data).


(i)

$307,025 (See (f) above).

(j)

$314,025 ($145,000 + $307,025 $138,000).

(k) $138,000 (Given in other data).


(l)

$107,200 (Same as (m)).

(m) $107,200 ($91,200 + $16,000).


(n) $92,000

($114,000 + $3,000 $9,000 $16,000)

Problems:SetB
Prepar P335BLowryManufacturingusesajobordercostsystemandappliesoverheadtoproductiononthebasisofdirect
e
labourhours.OnJanuary1,2012,JobNo.25wastheonlyjobinprocess.ThecostsincurredpriortoJanuary1
entries
onthisjobwereasfollows:directmaterials$10,000,directlabour$6,000,andmanufacturingoverhead
ina
$9,000.JobNo.23hadbeencompletedatacostof$45,000andwaspartoffinishedgoodsinventory.There

job
order
cost
system
and
job
cost
sheets.

wasa$5,000balanceintheRawMaterialsInventoryaccount.
DuringthemonthofJanuary,thecompanybeganproductiononJobs26and27,andcompletedJobs25and
26.Jobs23and25weresoldonaccountduringthemonthfor$65,000and$74,000,respectively.The
followingadditionaleventsoccurredduringthemonth:
1.

2.

3.

Thecompanypurchasedadditionalrawmaterialsfor$40,000onaccount.
Itincurredfactorylabourcostsof$31,500.Ofthisamount,$7,000relatedtoemployerpayrolltaxes.

Itincurredthefollowingmanufacturingoverheadcosts:indirectmaterials$10,000,indirectlabour
$7,500,depreciationexpense$12,000,andvariousothermanufacturingoverheadcostsonaccount
$11,000.
4. Itassigneddirectmaterialsanddirectlabourtojobsasfollows:

JobNo.
DirectMaterials
DirectLabour
25

$5,000

$3,000

26

15,000

12,000

27

13,000

9,900

5. Thecompanyusesdirectlabourhoursastheactivitybasetoassignoverhead.Directlabourhours
incurredoneachjobwereasfollows:JobNo.25,200;JobNo.26,800;andJobNo.27,600.

Instructions
(a)Calculatethepredeterminedoverheadratefor2012,assumingLowryManufacturingestimatestotal
manufacturingoverheadcostsof$500,000,directlabourcostsof$300,000,anddirectlabourhoursof
20,000fortheyear.
(b)OpenjobcostsheetsforJobs25,26,and27.EntertheJanuary1balancesonthejobcostsheetforJobNo.
25.
(c)Preparethejournalentriestorecordthepurchaseofrawmaterials,thefactorylabourcostsincurred,and
themanufacturingoverheadcostsincurredduringthemonthofJanuary.
(d)Preparethejournalentriestorecordtheassignmentofdirectmaterials,directlabour,andmanufacturing
overheadcoststoproduction.Inassigningmanufacturingoverheadcosts,usetheoverheadratecalculated
in(a).Postallcoststothejobcostsheetsasnecessary.
(e)Totalthejobcostsheetsforanyjob(s)completedduringthemonth.Preparethejournalentry(orentries)to
recordthecompletionofanyjob(s)duringthemonth.
(f)Preparethejournalentry(orentries)torecordthesaleofanyjob(s)duringthemonth.
(g)CalculatethebalanceintheWorkinProcessInventoryaccountattheendofthemonth.Whatdoesthis
balanceconsistof?
(h)Calculatetheamountofunderoroverappliedoverhead.

Prepare
P336BFortheyearendedDecember31,2012,thejobcostsheetsofMazzoneCompanycontainedthe
entriesina
followingdata:
jobordercost

systemand
partialincome
statement.

Job
Number

Explanation

Direct
Materials

Direct
Labour

Manufacturing
Overhead

Total
Costs

7650

Balance1/1

$17,000

$20,000

$25,000

$62,000

Currentyear's
costs

32,000

36,000

45,000

113,000

Balance1/1

12,000

16,000

20,000

48,000

Currentyear's
costs

30,000

40,000

50,000

120,000

7652

Currentyear's
costs

43,000

64,000

80,000

187,000

7651

Otherdata:
1.

2.

3.

4.

5.

6.

Rawmaterialsinventorytotalled$20,000onJanuary1.Duringtheyear,$100,000ofraw
materialswerepurchasedonaccount.
FinishedgoodsonJanuary1consistedofJobNo.7648for$93,000andJobNo.7649for
$62,000.
JobNo.7650andJobNo.7651werecompletedduringtheyear.
JobNos.7648,7649,and7650weresoldonaccountfor$490,000.
Manufacturingoverheadincurredonaccounttotalled$125,000.
Othermanufacturingoverheadconsistedofindirectmaterialsof$12,000,indirectlabourof
$18,000,anddepreciationonfactorymachineryof$19,500.

Instructions
(a)ProvetheagreementofWorkinProcessInventorywithjobcostsheetspertainingtounfinished
work.(Hint:UseasingleTaccountforWorkinProcessInventory.)Calculateeachofthe
following,thenposteachtotheTaccount:
1.

2.

3.

4.

5.

beginningbalance
directmaterials
directlabour
manufacturingoverhead
completedjobs

(b)PreparetheadjustingentryforManufacturingOverhead,assumingthebalanceisallocatedentirely
toCostofGoodsSold.
(c)Determinethegrossprofittobereportedfor2012.

Calculatethe P337BTelCorp.hasthefollowingestimatedcostsfor2012:
predetermine
Directmaterials
doverhead
rateandajob
Directlabour
cost.
Rentonfactorybuilding
Salessalaries
Depreciationonfactoryequipment

$160,000
2,000,000
150,000
250,000
80,000

Indirectlabour

120,000

Productionsupervisor'ssalary

150,000

Machinehours

40,000

Otherdata:
TelCorp.estimatesthat20,000directlabourhourswillbeworkedduringtheyear.Assumethat
manufacturingoverheadisappliedonthebasisofmachinehoursandJobXY120iscompletedduring
theyear.

Instructions
(a)Calculatetheoverheadratepermachinehour.
(b)Calculatetherateofdirectlabourperhour.
(c)Calculatethetotalcostofajobthatwilltake200machinehours,$15,000indirectmaterial,and50
directlabourhoursusinganormalcostsystem.

Prepare
P338BGiovanniLofaroisacontractorspecializingincustombuiltJacuzzis.OnMay1,2012,hisledger
entriesina
containsthefollowingdata:
joborder
RawMaterialsInventory
$30,000
costsystem
andcostof
WorkinProcessInventory
12,200
goods
ManufacturingOverhead
2,500(dr.)
manufacture
dschedule.
TheManufacturingOverheadaccounthasdebittotalsof$12,500andcredittotalsof$10,000.Subsidiary
dataforWorkinProcessInventoryonMay1includethefollowing:
JobbyCustomer

DirectMaterials

DirectLabour

ManufacturingOverhead

Looper

$2,500

$2,000

$1,400

Zammit

2,000

1,200

840

Ingle

900

800

560

$5,400

$4,000

$2,800

DuringMay,thefollowingcostswereincurred:(1)rawmaterialspurchasedonaccount$4,000,(2)
labourpaid$7,600,and(3)manufacturingoverheadpaid$1,400.
AsummaryofmaterialsrequisitionslipsandtimeticketsforthemonthofMayrevealsthefollowing:
JobCostSheets
JobbyCustomer

MaterialsRequisitionSlips

TimeTickets

Looper

$500

$400

Zammit

600

1,000

Ingle

2,300

1,300

Gao

1,900

2,900

$5,300

$5,600

Generaluse

1,500

2,000

$6,800

$7,600

Overheadwaschargedtojobsonthebasisof$0.70perdollarofdirectlabourcost.TheJacuzzisfor
customersLooper,Zammit,andInglewerecompletedduringMay.EachJacuzziwassoldfor$12,000
cash.

Instructions
(a)PreparejournalentriesfortheMaytransactions:
1. thepurchaseofrawmaterials,factorylabourcostsincurred,andmanufacturingoverhead
costsincurred

2. assignmentofdirectmaterials,labour,andoverheadtoproduction

3. completionofjobsandsaleofgoods

(b)PosttheentriestoWorkinProcessInventory.
(c)ReconcilethebalanceinWorkinProcessInventorywiththecostsofunfinishedjobs.
(d)PrepareacostofgoodsmanufacturedscheduleforMay.

Prepare
P339BSNCproducesfiretrucks.Thecompanyusesanormaljobordercostingsystemtocomputeitscostof
entriesand
goodsmanufactured.Thecompany'spolicyistopriceitsjobatcostplus40%markup.OnJanuary1,
closeout
2012therewasonlyonejobinprocesswiththefollowingcosts:
underor

JobA1
overapplied
overhead.
Directmaterials
$3,500
Directlabour

$15,000

Appliedoverhead

$18,000

Total

$36,500

ThefollowingbalancesweretakenfromthegeneralledgerofthecompanyasofJanuary1,2012:
Directmaterialsinventory

$35,000

Finishedgoodsinventory(forJobD1)

$65,000

Duringtheyear2012,thefollowingeventsoccurred:
Directmaterialswerepurchasedonaccountfor$275,000
Twomorejobswerestarted:JobB1andJobC1.Directmaterialsanddirectlabourcostsincurredby
eachjobinprocessduringtheyear2012areasfollows:

JobA1

JobB1

JobC1

Directmaterials

$150,000

$30,000

$10,000

Directlabour

$150,000

$35,000

$15,000

Thecompanyincurredthefollowingactualfactoryoverheadduringtheyear:
Factoryrent

$120,000

Factorysupplies

$45,500

Indirectlabour

$75,750

JobsA1andB1werecompletedandJobsD1andA1weresold.

Instructions
(a)Calculatethetotalappliedoverheadfortheyear2012ifthefactoryoverheadcostsareappliedto
eachjobonthebasisofdirectlabourdollars.
(b)PreparesimplejobordercostsheetsforjobsA1,B1andC1fortheyearendedDecember31,
2012.
(c)Determinewhetheroverheadisoverappliedorunderapplied.Byhowmuch?

(d)PrepareascheduleofCostofGoodsSold,identifyingbothnormalandadjustedcostofgoodssold,
fortheyearendedDecember31,2012.
(e)ComputethesellingpriceofJobA1.
(f)ComputetheendingbalancesasofDecember31,2012,forthefollowingaccounts:directmaterials
andworkinprocess.

Prepareentries P340BLaramieLtd.usesanormaljobordercostsystem.AtthebeginningofthemonthofJune,twoorders
andcloseout
wereinprocessasfollows:
underor

Order8A
Order10A
overapplied
overheads.
Rawmaterials
$2,000
$1,900
Directlabour

1,200

200

Manufacturingoverheadabsorbed

1,800

300

TherewasnoinventoryoffinishedgoodsonJune1.DuringthemonthofJune,orders11Aand12A
wereputintoprocess.
Rawmaterialsrequirementsamountedto$13,000,directlabourexpensesforthemonthwere$20,000,
andactualmanufacturingoverheadrecordedduringthemonthamountedto$28,000.
TheonlyorderinprocessattheendofJunewasorder12A,andthecostsincurredforthisorderwere
$1,150ofrawmaterialsand$1,000ofdirectlabour.Inaddition,order11A,whichwas100%complete,
wasstillonhandasofJune30.Totalcostsallocatedtothisorderwere$3,300.Thefirm'soverhead
allocationrateinJunewasthesameastherateusedinMayandisbasedonlabourcost.

Instructions
Preparejournalentries,withsupportingcalculations,torecordthecostofgoodsmanufactured,thecost
ofgoodssold,andtheclosingoftheoverorunderappliedmanufacturingoverheadtoCostofGoods
Sold.
(adaptedfromCMACanada)
Calculate
P341BHandyWidgetCo.doesawidevarietyofmetalworkonacustombasis.DuringthemonthofJune2012,
variousjob
itworkedonsixjobs.Asummaryofthejobcostsheetsonthesejobsisgivenbelow:
costsina
JobNo.
DirectMaterials
DirectLabour
FactoryOverheadApplied
TotalCostofJob
comprehensive
manufacturing
43
$410
$360
$288
$1,058
system.
44
950
990
792
2,732
45

110

85

68

263

46

1,500

1,140

912

3,552

47

950

850

680

2,480

270

115

92

477

$4,190

$3,540

$2,832

$10,562

48

HandyWidgethasusedthesameoverheadrateonalljobs.JobNo.43wastheonlyjobinprocessat
thebeginningofthemonth.Atthattime,ithadincurreddirectlabourcostsof$150andtotalcostsof
$570.

Instructions
Answerthefollowingquestions:
(a)WhatisthepredeterminedoverheadratethattheHandyWidgetCo.uses?
(b)AssumethatduringJunethefactoryoverheadwasoverappliedby$600.Whatwastheactual
factoryoverheadcostincurredduringthemonth?
(c)WhatwasthetotalamountofdirectmaterialsplacedintoproductionduringJune?
(d)HowmuchdirectlabourcostwasincurredduringJune?
(e)WhatwasthecostofgoodsmanufacturedforJune?
(f)Thebeginningfinishedgoodsinventorywas$2,550.Whatwasthecostofgoodssoldforthemonth
iftheendingfinishedgoodsinventorywas$3,550?
(adaptedfromCGACanada)
Analyze
P342BSpiveyCompany'sfiscalyearendsonJune30.Thefollowingaccountsarefoundinitsjobordercost
manufacturing
accountingsystemforthefirstmonthofthenewfiscalyear:
accountsand
RawMaterialsInventory
determine
missing
July1 Beginningbalance
19,000
July31
Requisitions
(a)
amounts.
31 Purchases
90,400

July31 Endingbalance

(b)

WorkinProcessInventory
July1 Beginningbalance

(c)

July31

Jobscompleted

31 Directmaterials

(f)

70,000

31 Directlabour

(d)

31 Overhead

(e)

July31 Endingbalance

(g)

FinishedGoodsInventory
July1 Beginningbalance

(h)

July31

Costofgoodssold

(j)

31 Completedjobs

(i)

July31 Endingbalance

(k)

FactoryLabour
July31 Factorywages

(l)

July31

Wagesassigned

(m)

ManufacturingOverhead
July31 Indirectmaterials

8,900

July31

Overheadapplied

$104,000

31 Indirectlabour

16,000

31 Otheroverhead

(n)

Otherdata:
1.

2.

OnJuly1,twojobswereinprocess:JobNo.4085andJobNo.4086,withcostsof$19,000and
$8,200,respectively.
DuringJuly,JobNos.4087,4088,and4089werestarted.OnJuly31,onlyJobNo.4089was
unfinished.Thisjobhadchargesfordirectmaterialsof$2,000anddirectlabourof$1,500,plus
manufacturingoverhead.Manufacturingoverheadwasappliedattherateof130%ofdirect
labourcost.

3. OnJuly1,JobNo.4084,costing$135,000,wasinthefinishedgoodswarehouse.OnJuly31,
JobNo.4088,costing$143,000,wasinfinishedgoods.
4. Overheadwas$3,000underappliedinJuly.

Instructions

Listtheletters(a)through(n)andindicatetheamountpertainingtoeachletter.Showcalculations.

Calculatejob P343BPriceGordonArchitecturalConsultantsLtd.usesamodifiedjobordercostingsystemtokeeptrackof
costsand
projectcosts.DuringOctober2012,thefirmworkedonfourprojects.Thefollowingtableprovidesa
inventories,
summaryofthecostofmaterialsusedandthenumberofconsultinghoursworkedoneachofthefour
andprepare
projectsinOctober:
anincome
ProjectNumber
CostofMaterials
ConsultingHoursWorked
statementfor
aservice
80
$120
138
organization.
84
85
145
85

100

160

86

150

187

TherecordsforSeptembershowedthat40hourshadbeenworkedand$80worthofmaterialshadbeen
usedonProject80.Projects80and86werecompletedinOctober,andbillsweresenttotheclients.
ConsultantsatPriceGordonbilledclientsat$120perconsultinghour.Theactuallabourcosttothefirm
(basedonsalarycost)was$60perhour.Overheadischargedtoprojectsbasedontheconsultants'time
spentontheproject.Totaloverheadforthecurrentfiscalyear,basedonexpectedactivityof10,000
consultinghours,wasestimatedtobe$267,000.Thistotaloverheadcostincludedafixedportionof
$84,000,whichcoveredrent,depreciation,andsoon.ActualoverheadforOctoberwas$21,455.Price
GordonclosesunderandoverappliedoverheadtoCostofServicesatmonthend.

Instructions
(a)DeterminetheproductcostsforProject80.
(b)DeterminethebalanceinWorkinProcessasatOctober31.
(c)PreparetheincomestatementforOctober2012,includingtheappropriateamountofunderorover
appliedoverhead.OtherexpensesforOctoberwere$2,340.94.

SOLUTIONS TO PROBLEMS: SET B


PROBLEM 3-35B
(a) $500,000 20,000 direct labour hours = $25 per direct labour hour
(b) See solution to part (e) for job cost sheets
(c) Raw Materials Inventory.............................................
Accounts Payable...............................................

40,000

Factory Labour............................................................
Factory Wages Payable......................................
Employer Payroll Taxes Payable........................

31,500

Manufacturing Overhead...........................................
Accumulated Depreciation.................................
Raw Materials Inventory.....................................
Accounts Payable...............................................
Factory Labour....................................................

40,500

(d) Work in Process Inventory.........................................


Raw Materials Inventory.....................................
($5,000 + $15,000 + $13,000)

33,000

Work in Process Inventory.........................................


Factory Labour....................................................

24,900

40,000
24,500
7,000
12,000
10,000
11,000
7,500

33,000

24,900

($3,000 + $12,000 + $9,900)


Work in Process Inventory.........................................
Manufacturing Overhead....................................
(200 + 800 + 600) $25 per hour

40,000

40,000

See solution to part (e) for postings to job cost sheets.

PROBLEM 3-35B (Continued)


(b)&(e)
Job Cost Sheets
Job No. 25
Date
Direct Materials
Beg.
Jan.

$10,000
5,000
$15,000

Direct
Labour
$6,000
3,000
$9,000

Manufacturing Overhead
*$ 9,000*
* 5,000*
*$14,000*

Cost of completed job


Direct materials..............................................................
Direct labour...................................................................
Manufacturing overhead................................................
Total cost................................................................................

$15,000
9,000
14,000
$38,000

*$25 200 direct labour hours


Job No. 26
Date
Direct Materials
Jan.

$15,000
$15,000

Direct
Labour
$12,000
$12,000

Manufacturing Overhead
**$20,000**
**$20,000**

Cost of completed job


Direct materials...............................................................
Direct labour...................................................................
Manufacturing overhead................................................
Total cost.................................................................................

$15,000
12,000
20,000
$47,000

**$25 800 direct labour hours


Job No. 27
Date
Direct Materials

Direct
Labour
Jan.
$13,000
$9,900
***$25 600 direct labour hours

Manufacturing Overhead
***$15,000***

(f)

(g)

Finished Goods Inventory......................................


Work in Process Inventory.............................
($38,000 + $47,000)

85,000

Cost of Goods Sold.................................................


Finished Goods Inventory..............................
($45,000 + $38,000)

83,000

Accounts Receivable..............................................
Sales.................................................................
($65,000 + $74,000)

139,000

Beginning balance
Direct materials
Direct labour
Manufacturing overhead
Ending balance

Work in Process
25,000 85,000
33,000
24,900
40,000
37,900

85,000

83,000

139,000

Cost of completed jobs 25 and 26

The balance in this account consists of the current costs assigned to Job
27:
Direct Materials..................................................................
Direct Labour.....................................................................
Manufacturing Overhead..................................................
Total costs assigned.................................................

$13,000
9,900
15,000
$37,900

(h) Manufacturing Overhead


Actual
Applied
40,500
40,000
500
The balance in the Manufacturing Overhead account is under-applied.

PROBLEM 3-36B
(a)

1/1

12/31

Work in Process Inventory


Balance (1)
110,000 Completed work (5) (iii)
Direct materials (2)
105,000
Direct labour (3)
140,000
Manufacturing overhead (4)
175,000
Balance (6)
187,000

343,000

(1)

Job 7650
Job 7651

$62,000
48,000
$110,000

(3)

Job 7650
Job 7651
Job 7652

$36,000
40,000
64,000
$140,000

(2)

Job 7650
Job 7651
Job 7652

$32,000
30,000
43,000
$105,000

(4)

Job 7650
Job 7651
Job 7652

$45,000
50,000
80,000
$175,000

(5) (i)

Job 7650
Beginning balance..................................................
Direct materials.......................................................
Direct labour............................................................
Manufacturing overhead........................................

(ii) Job 7651


Beginning balance..................................................
Direct materials.......................................................
Direct labour............................................................
Manufacturing overhead........................................
(iii) Total cost of completed work
Job 7650..................................................................
Job 7651..................................................................

$62,000
32,000
36,000
45,000
$175,000
$48,000
30,000
40,000
50,000
$168,000
$175,000
168,000
$343,000

PROBLEM 3-36B (Continued)


Work in process balance.................................................
Unfinished Job 7652.........................................................
(iv) Current years cost
Direct materials............................
Direct labour.................................
Manufacturing overhead.............

$187,000
$187,000 (iv)

$43,000
64,000
80,000
$187,000

(b) Actual overhead costs


Incurred on account................................................
Indirect materials.....................................................
Indirect labour..........................................................
Depreciation.............................................................

$125,000
12,000
18,000
19,500
$174,500

Applied overhead costs


Job 7650...................................................................
Job 7651...................................................................
Job 7652...................................................................

$45,000
50,000
80,000
$175,000

Actual overhead..............................................................
Applied overhead............................................................
Over-applied overhead...................................................
Manufacturing Overhead................................................
Cost of Goods Sold.................................................
(c) Sales (given)......................................................
Cost of goods sold
Job 7648...................................................
Job 7649...................................................
Job 7650...................................................
Less: Over-applied overhead...........................
Gross profit........................................................

$174,500
175,000
$
500
500

500
$490,000

$93,000
62,000
175,000
330,000
500

329,500
$160,500

PROBLEM 3-37B
(a) First determine the total estimated manufacturing overhead costs for the
year.
Rent on factory building
Depreciation on factory equipment
Indirect labour
Production supervisors salary
Total estimated MOH costs

Predetermined overhead
rate

$150,00
0
80,000
120,000
150,00
0
$500,00
0

Estimated annual overhead costs


Expected annual operating activity

= $500,000 40,000 machine hours


= $12.50 per machine hour
(b) Direct labour rate = $2,000,000 20,000 labour hours
= $100 per direct labour hour
(c) Total cost of the job would be:
Direct materials
Direct labour (50 hrs $100)
Manufacturing overhead (200 hrs $12.50)
Total cost of the job

$15,000
5,000
2,500
$22,500

PROBLEM 3-38B
(a)
(1) Raw Materials Inventory............................................
Accounts Payable...............................................

4,000

Factory Labour...........................................................
Cash.....................................................................

7,600

Manufacturing Overhead...........................................
Cash.....................................................................

1,400

(2) Work in Process Inventory........................................


Manufacturing Overhead...........................................
Raw Materials Inventory.....................................

5,300
1,500

Work in Process Inventory........................................


Manufacturing Overhead...........................................
Factory Labour...................................................

5,600
2,000

Work in Process Inventory........................................


($5,600 .70)
Manufacturing Overhead...................................

3,920

(3) Finished Goods Inventory.........................................


Work in Process Inventory................................

20,190

Direct

Direct

Manufacturing

Total

Materials

Labour

Overhead*

Costs

Looper

$3,000

$2,400

$1,680

$7,080

Zammit

2,600

2,200

1,540

6,340

Ingle

3,200

2,100

1,470

6,770

Job

$20,190

4,000

7,600

1,400

6,800

7,600

3,920

20,190

*70% of direct labour cost


PROBLEM 3-38B (Continued)

(b)

Cash.............................................................................
Sales (3 $12,000)..............................................

36,000

Cost of Goods Sold....................................................


Finished Goods Inventory.................................

20,190

5/1

5/31

Work in Process Inventory


Balance
12,200 5/31
Completed work
Direct materials
5,300
Direct labour
5,600
Overhead applied
3,920
Balance
6,830

36,000
20,190

20,190

(c) Work in Process Inventory.........................................................

$6,830

Job: Gao (Direct materials $1,900 + Direct labour $2,900 +


Manufacturing overhead $2,030)...................................

$6,830

(d)

GIOVANNI LOFARO COMPANY


Cost of Goods Manufactured Schedule
For the Month Ended May 31, 2012
Work in process, May 1............................................
Direct materials used................................................
Direct labour..............................................................
Manufacturing overhead applied.............................
Total manufacturing costs................................
Total cost of work in process...................................
Less: Work in process, May 31...............................
Cost of goods manufactured...................................

$5,300
5,600
3,920

$12,200

14,820
27,020
6,830
$20,190

PROBLEM 3-39B
(a) Applied overhead rate (from Job A-1) = $18,000 $15,000 = 120%
Direct labour costs incurred: $150,000 + $35,000 + $15,000 = $200,000
MOH applied = $200,000 1.2 = $240,000.
(b)

Job A-1
Date
1/1
Year

Direct
Materials
$ 3,500
150,000
$153,500

Direct
Labour
$ 15,000
150,000
$165,000

Manufacturing
Overhead
$ 18,000
180,000
$198,000

Cost of completed job


Direct materials................................................................
Direct labour....................................................................
Manufacturing overhead.................................................
Total cost
Job B-1
Date
1/1
Year

Direct
Materials

Direct
Labour

Manufacturing
Overhead

$30,000
$30,000

$35,000
$35,000

$42,000
$42,000

Cost of completed job


Direct materials................................................................
Direct labour....................................................................
Manufacturing overhead.................................................
Total cost

$153,500
165,000
198,000
$516,500

$30,000
35,000
42,000
$107,000

PROBLEM 3-39A (Continued)


Job C-1
Date
1/1
Year

Direct
Materials

Direct
Labour

Manufacturing
Overhead

$10,000
$10,000

$15,000
$15,000

$18,000
$18,000

Cost of completed job


Direct materials................................................................
Direct labour....................................................................
Manufacturing overhead.................................................
Total cost
(c)

(d)

Manufacturing overhead applied:


Overhead incurred during the month
Manufacturing overhead applied
Under-applied overhead

$10,000
15,000
18,000
$43,000

$241,250
240,000
$ 1,250

SNC
Statement of Cost of Goods Sold
For the Year Ended December 31, 2012
Finished goods inventory, January 1................
Cost of goods manufactured*..........................
Cost of goods available for sale........................
Less: Finished goods, December 31**.............
Unadjusted Cost of goods sold***.....................
Plus: Under-applied overhead..........................
Adjusted cost of goods sold..............................
*Job A-1, $516,500 + Job B-1, $107,000
**Job B-1, $107,000
***Job D-1, $65,000 + Job A-1, $516,500

$65,000
623,500
688,500
107,000
581,500
1,250
$582,750

PROBLEM 3-39A (Continued)


(e)
(f)

Selling price of Job A-1: $516,500 1.40 = $723,100


Ending balance in direct materials inventory:
Balance, January 1
Plus: purchases
Direct material available for use
Less: materials used in production
Balance, December 31

$ 35,000
275,000
310,000
190,000
$120,000

Ending balance in work-in-process inventory:


Balance, January 1.....................................
Plus: Manufacturing costs during the month:
Direct materials.................................. $190,000
Direct labour........................................
200,000
Applied manufacturing overhead.
240,000
Total cost of work-in-process....................
Less: cost of goods manufactured..........
Balance, December 31*...............................
*(Job C-1, $43,000)

$ 36,500

630,000
666,500
623,500
$ 43,000

PROBLEM 3-40B
Work in process..........................................................
Raw materials inventory.....................................

13,000

Work in process..........................................................
Factory Labour....................................................

20,000

Work in process..........................................................
Manufacturing Overhead....................................
(Overhead rate = $1,800 $1,200 = 150%
of labour cost; $20,000 150% = $30,000)

30,000

Manufacturing Overhead...........................................
Various accounts................................................

28,000

Finished goods...........................................................
Work in process..................................................

66,750

Calculation of finished goods:


Beginning inventory, Work in process
Plus: Raw materials
Direct labour
Manufacturing overhead
Total manufacturing costs
Ending inventory, Work in process
Cost of goods manufactured

13,000
20,000
30,000

28,000
66,750

$ 7,400 *
13,000
20,000
30,000
70,400
3,650 (1)
$ 66,750

* Order 8A ($2,000 + $1,200 +


$1,800) + Order 10A ($1,900 +
$200 + $300) = $7,400
(1) Order 12A
Raw materials
Direct labour
Overhead ($1,000 150%)

Cost of goods sold.....................................................


Finished goods...................................................

$ 1,150
1,000
1,500
$ 3,650
63,450

63,450

PROBLEM 3-41 (Continued)


(e)

(f)

Work in process inventory, June 1


Plus: manufacturing costs
Direct material
Direct labour
Factory overhead applied (DL 80%)
Total manufacturing costs
Less: Work in process inventory, June 30
Cost of goods manufactured for June
Finished goods inventory, June 1
Plus: Cost of goods manufactured
Cost of goods available for sale
Less: Finished goods inventory, June 30
Cost of goods sold

$
$3,890
3,390
2,712

$ 2,550
10,085
12,635
3,550
$ 9,085

570

9,992
10,562
477
$10,085

PROBLEM 3-42B
(a) $78,900

($70,000 + $8,900).

(b) $30,500

[($19,000 + $90,400) $78,900 (See (a))].

(c) $27,200

(Given in other data$19,000 + $8,200).

(d) $80,000

($104,000 manufacturing overhead applied 130%).

(e) $104,000

(Manufacturing overhead applied).

(f)

[$27,200 + $70,000 + $80,000 + $104,000 $5,450 (See (g))].

$275,750

(g) $5,450

[$2,000 + $1,500 + ($1,500 130%)].

(h) $135,000

(Given in other data).

(i)

$275,750

(Same as (f)).

(j)

$267,750

[$135,000 + $275,750 $143,000 (Given in other data)].

(k) $143,000

(Given in other data).

(l)

[$80,000 (See (d)) + $16,000].

$96,000

(m) $96,000

(Same as (l)).

(n) $82,100

[$104,000 + $3,000 (Given in other data) $8,900 $16,000].

PROBLEM 3-43B
(a)

Overhead rate = $267,000 10,000 hours = $26.70


Project 80
Direct material ($80 + $120)
Direct labour (40 hrs + 138 hrs) x $60/hour
Overhead (40 hrs + 138 hrs) x $26.70/hour

(b)

200.00
10,680.00
4,752.60
$15,632.60

Work in Process, October 31

Materials
Direct labour
(at $60 per hour)
Overhead
(at $26.70 per DL hour)

(c)

Project 84
$
85.00

Project 85
$ 100.00

Total
$
185.00

8,700.00

9,600.00

18,300.00

3,871.50
$12,656.50

4,272.00
$13,972.00

8,143.50
$26,628.50

PRICE-GORDON ARCHITECTURAL CONSULTANTS LTD.


Income Statement
for the month of October, 2012
Consulting revenue
Less: Cost of services
Gross Profit
Less: Operating expenses
Net Income

$43,800.00
36,629.50
7,170.50
2,340.94
$ 4,829.56

(1)
(2)

PROBLEM 3-43B (Continued)


(1)

(2)

Consulting revenue:
Project 80 (178 hours at $120/hour)
Project 86 (187 hours at $120/hour)

Cost of services:
Project 80 (as in (a))
Project 86
Plus: under-applied overhead
Adjusted cost of services

(3)

(4)

Project 86
Direct material
Direct labour (187 hrs $60/hour)
Overhead (187 hrs $26.70/hour)

Overhead incurred (given)


Overhead applied:
(138 + 145 + 160 + 187) $26.70
Under-applied overhead

$21,360.00
22,440.00
$43,800.00

$15,632.60
16,362.90
31,995.50
4,634.00
$36,629.50

150.00
11,220.00
4,992.90
$16,362.90

$21,455.00
16,821.00
$ 4,634.00

(3)

(4)