ExErcisEs: sEt B - Cengage · ExErcisEs: sEt B Product Costing E1B. ... h. costs to design a wedding invitation ... 2 Chapter 2: Costing Systems: Job Order Costing

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ExErcisEs: sEt BProduct CostingE1B. Bell Printing Company specializes in wedding invitations. Bell needs information to budget next year’s activities. Write yes or no to indicate whether each of the following costs is likely to be available in the company’s product costing system:

a. cost of paper and envelopesb. printing machine setup costsc. depreciation of printing machineryd. advertising costse. repair costs for printing machinery

f. costs to deliver stationery to customersg. office supplies costsh. costs to design a wedding invitationi. cost of inkj. sales commissions

Costing Systems: Industry LinkageE2B. Which of the following products would typically be accounted for using a job order costing system? Which would typically be accounted for using a process costing system?

a. paintb. jelly beans c. jet aircraft d. bricks e. tailor-made suit f. liquid detergent g. helium gas canisters used to inflate balloonsh. aluminum compressed-gas cylinders with a special fiberglass wrap for a Mount Everest

expedition

Costing Systems: Industry LinkageE3B. Which of the following products would typically be accounted for using a job order costing system? Which would typically be accounted for using a process costing system?

a. standard nails b. television sets c. printed wedding invitations d. a limited edition of lithographs

e. flea collars for pets f. personal marathon training program g. breakfast cereal h. an original evening gown

Job Order Cost FlowE4B. Accounting connEction ▶ The three product cost elements—direct materials, direct labor, and overhead—flow through a job order costing system in a structured, orderly fashion. Specific accounts and subsidiary ledgers are used to verify and record cost information. Write a paragraph describing the cost flow in a job order costing system.

Work in Process Inventory: T Account AnalysisE5B. On July 1, New Haven Company’s Work in Process Inventory account showed a beginning balance of $29,400. The Materials Inventory account showed a beginning balance of $240,000. Production activity for July was as follows: (a) Direct materials costing $238,820 were requested for production; (b) total manufacturing payroll was $140,690, of which $52,490 was used to pay for indirect labor; (c) indirect materials costing $28,400 were purchased and used; and (d) overhead was applied at a rate of 150 percent of direct labor costs. 1. Record New Haven’s materials, labor, and overhead costs for July in T accounts. 2. Compute the ending balance in the Work in Process Inventory account. Assume a

transfer of $461,400 to the Finished Goods Inventory account during the period.

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T Account Analysis with UnknownsE6B. Partial operating data for Merton Company follows. Management has set the pre-determined overhead rate for the current year at 120 percent of direct labor costs.

Account/Transaction June JulyBeginning Materials Inventory (a) (e)Beginning Work in Process Inventory $ 89,605 (f )Beginning Finished Goods Inventory 79,764 $ 67,660Direct materials requested 59,025 (g)Materials purchased 57,100 60,216Direct labor costs 48,760 54,540Overhead applied (b) (h)Cost of units completed (c) 231,861Cost of Goods Sold 166,805 (i)Ending Materials Inventory 32,014 27,628Ending Work in Process Inventory (d) (j)Ending Finished Goods Inventory 67,660 30,515

Using T accounts, compute the unknown values. Show all your computations.

T Account Analysis with UnknownsE7B. Partial operating data for Charring Cross Company follows. Management has set the predetermined overhead rate for the current year at 80 percent of direct labor costs.

Account/Transaction DecemberBeginning Materials Inventory $ 42,000Beginning Work in Process Inventory 66,000Beginning Finished Goods Inventory 129,000Direct materials used 168,000Direct materials purchased (a)Direct labor costs 382,000Overhead applied (b)Cost of units completed (c)Cost of Goods Sold 808,000Ending Materials Inventory 38,000Ending Work in Process Inventory 138,600Ending Finished Goods Inventory (d)

Using T accounts, compute the unknown values. Show all your computations.

Job Order Costing: T Account AnalysisE8B. Fashion Floral, Inc., produces special-order artificial flower arrangements, so it uses a job order costing system. Overhead is applied at the rate of 80 percent of direct labor cost. The following is a list of transactions for June:June 1 Purchased direct materials on account, $500. 2 Purchased indirect materials on account, $60. 4 Requested direct materials costing $400 ($300 used on Job AA and $100

used on Job BB) and indirect materials costing $150 for production. 10 Paid the following overhead costs: utilities, $60; manufacturing rent, $400;

and maintenance charges, $40. 15 Recorded the following gross wages and salaries for employees: direct labor,

$1,200 ($800 for Job AA and $400 for Job BB); indirect labor, $300. 15 Applied overhead to production.

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June 16 Completed and transferred Job AA and Job BB to finished goods inventory; total cost of both jobs was $2,560.

20 Delivered Job AA to the customer; total production cost was $1,740 and billed customer for the sales price $2,500.

30 Recorded these overhead costs (adjusting entries): prepaid insurance expired, $50; and depreciation—machinery, $100.

REqUIRED 1. Record the entries for all transactions in June using T accounts for the following:

Materials Inventory, Work in Process Inventory, Finished Goods Inventory, Over-head, Cash, Accounts Receivable, Prepaid Insurance, Accumulated Depreciation—Machinery, Accounts Payable, Payroll Payable, Sales, and Cost of Goods Sold. Determine the partial account balances. Assume no beginning inventory balances. Also assume that when the payroll was recorded, entries were made to the Payroll Payable account.

2. Compute the amount of underapplied or overapplied overhead as of June 30 and transfer it to the Cost of Goods Sold account.

Job Order Cost Card and Computation of Product Unit CostE9B. In January 2014, Cabinet Company worked on six job orders for specialty kitchen cabinets. It began Job A-62 for Zeke Cabinets, Inc., on January 10 and completed it on January 24. Partial data for Job A-62 are as follows.

Costs Machine Hours UsedDirect materials:

Cedar $7,900Pine 6,320Hardware 2,930Assembly supplies 988

Direct labor:Sawing 2,840 120Shaping 2,200 220Finishing 2,250 180Assembly 2,890 50

Cabinet Company produced a total of 34 cabinets for Job A-62. Its current predeter-mined overhead rate is $21.60 per machine hour. From the information given, prepare a job order cost card and compute the job order’s product unit cost.

Computation of Product Unit CostE10B. AU Company uses job order costing to determine the product unit cost for one of its products based on the following costs incurred during March: liability insurance, manufacturing, $2,500; rent, sales office, $2,900; depreciation, manufacturing equip-ment, $6,100; direct materials, $32,650; indirect labor, manufacturing, $3,480; indirect materials, $1,080; heat, light, and power, manufacturing, $1,910; fire insurance, manu-facturing, $2,600; depreciation, sales equipment, $4,250; rent, manufacturing, $3,850; direct labor, $18,420; manager’s salary, manufacturing, $3,100; president’s salary, $5,800; sales commissions, $8,250; and advertising expenses, $2,975. The Inspection Department reported that 48,800 good units were produced during March. Determine the unit product cost. (Round to two decimal places.)

Computation of Product Unit CostE11B. Wild Things, Inc., manufactures custom-made stuffed animals. Last month, the company produced 4,540 stuffed bears with stethoscopes for the local children’s hospi-tal to sell at a fund-raising event. Using job order costing, determine the product unit

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cost of a stuffed bear based on the following costs incurred during the month: manufac-turing utilities, $500; depreciation on manufacturing equipment, $450; indirect materi-als, $300; direct materials, $1,300; indirect labor, $800; direct labor, $2,400; sales com-missions, $3,000; president’s salary, $4,000; insurance on manufacturing plant, $600; advertising expense, $500; rent on manufacturing plant, $5,000; rent on sales office, $4,000; and legal expense, $250.

Computation of Product Unit CostE12B. Arch Corporation manufactures specialty lines of women’s apparel. During Feb-ruary, the company worked on three special orders: A-25, A-27, and B-14. Cost and production data for each order are as follows.

Job A-25 Job A-27 Job B-14Direct materials:

Fabric Q $10,840 $12,980 $17,660Fabric Z 11,400 12,200 13,440Fabric YB 5,260 6,920 10,900

Direct labor:Garment maker 8,900 10,400 16,200Layout 6,450 7,425 9,210Packaging 3,950 4,875 6,090

Overhead:(120% of direct labor costs) ? ? ?

Number of units produced 700 775 1,482

1. Compute the total cost associated with each job. Show the subtotals for each cost category.

2. Compute the product unit cost for each job. (Round computations to two decimal places.)

Job Order Costing in a Service OrganizationE13B. A job order cost card for Hal’s Computer Services follows. Complete the missing information. The profit factor in the organization’s cost-plus contract is 30 percent of total cost.

JOB ORDER COST CARD Hal’s Computer Services

Customer: James Lowe

Job Order No.: 8-324

Contract Type: Cost-Plus

Type of Service: Software Installation and Internet Interfacing

Date of Completion: October 6, 2014

Costs Charged to Job Total Cost

Software installation services:Installation labor $300Service overhead (?% of installation labor costs) ? Total $450

Internet services:Internet labor $200Service overhead (20% of Internet labor costs) 40Total $ ?

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Cost Summary to Date Total Cost

Software installation services $ ? Internet services ?

Total $ ? Profit margin (30% of total cost) ?Contract revenue $ ?

Computation of Overhead RateE14B. The overhead costs that Lucca Industries, Inc., used to compute its overhead rate for the past year are as follows.

Indirect materials and supplies, repair and maintenance, outside service contracts, indirect labor, factory supervision, factory insurance, heat, light, and power costs $440,000Property taxes and miscellaneous overhead costs 16,000Depreciation, machinery 54,000Total overhead costs $510,000

The allocation base for the past year was 50,000 total machine hours. For the next year, all overhead costs except depreciation, property taxes, and miscellaneous overhead are expected to increase by 20 percent. Depreciation should increase by 40 percent, and property taxes and miscellaneous overhead are expected to increase by 10 percent. Plant capacity in terms of machine hours used will increase by 12,120 hours. 1. Compute the past year’s overhead rate. 2. Compute the overhead rate for next year.

Computation and Application of Overhead RateE15B. For Patch It Company, labor is the highest single expense, totaling $600,000 for 20,000 hours of work last year. Overhead costs for last year were $450,000 and were applied to specific jobs on the basis of labor hours worked. This year, the company anticipates a 30 percent increase in overhead costs. Labor costs will increase by $30,000, and the number of hours worked is expected to increase by 25 percent. 1. Determine the total amount of overhead anticipated this year. 2. Compute the overhead rate for this year. 3. At the end of this year, Patch It had compiled a total of 26,000 labor hours worked.

The actual overhead incurred was $610,400.a. Using the overhead rate computed in 2, determine the total amount of overhead

applied to operations during the year.b. Compute the amount of under/overapplied overhead for the year.c. Accounting connEction ▶ Will the Cost of Goods Sold account be increased

or decreased to correct the under/overapplication of overhead?

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ExErcisEs: sEt B - Cengage · ExErcisEs: sEt B Product Costing E1B. ... h. costs to design a wedding invitation ... 2 Chapter 2: Costing Systems: Job Order Costing