Chapter 5--Product and Service Costing: Job-Order System Chapter 5--Product and

Service Costing: Job-Order System

Student: ___________________________________________________________________________

1. Which of the following is a pure service?

A. bungee jumping
B. beauty salon
C. restaurant
D. software

2. A pure service organization has

A. no raw materials, no inventories, and a definite separation between the plant and the customer.
B. raw materials, tangible items, and no separation between the plant and the customer.
C. no raw materials, no tangible items, and no separation between the plant and the customer.
D. none of these.

3. Which of the following is a manufactured product?

A. bungee jumping
B. beauty salon
C. restaurant
D. automobile

4. Inseparability refers to the

A. nonphysical nature of services as opposed to products.
B. fact that production and consumption are inseparable for services.
C. greater chances for variation in the performance of services than in the production of products.
D. fact that services cannot be inventoried but must be consumed when performed.

5. Heterogeneity refers to the

A. nonphysical nature of services as opposed to products.
B. fact that production and consumption are inseparable for services.
C. greater chances for variation in the performance of services than in the production of products.
D. fact that services cannot be inventoried but must be consumed when performed.
6. Intangibility refers to the
A. nonphysical nature of services as opposed to products.
B. fact that production and consumption are inseparable for services.
C. greater chances for variation in the performance of services than in the production of products.
D. fact that services cannot be inventoried but must be consumed when performed.

7. Perishability refers to the

A. nonphysical nature of services as opposed to products.
B. fact that production and consumption are inseparable for services.
C. greater chances for variation in the performance of services than in the production of products.
D. fact that services cannot be inventoried but must be consumed when performed.

8. Which of the following firms would make extensive use of service costing?
A. auto manufacturer
B. furniture manufacturer
C. auto dealer
D. CPA firm

9. Manufacturers producing unique or customized products would employ a(n)

A. process costing system.
B. job-costing system.
C. homogeneous costing system.
D. all of these.

10. Which of the following products would NOT use job-order costing?
A. houses
B. chemicals
C. ships
D. custom-built furniture

11. Which of the following firms would make extensive use of a job-order costing?
A. dental and medical services
B. canned foods
C. discount brokers
D. petroleum
12. Process costing would be most applicable for
A. an electronics producer.
B. custom machining.
C. high rise building construction.
D. CPA audits.

13. Which of the following would NOT use a process costing system?
A. electrical wire
B. cotton yarn
C. newsprint
D. satellites

14. Which cost accounting process would be most appropriate for accumulating costs of identical, standardized
units?
A. job-order costing
B. process costing
C. normal costing
D. standard costing

15. Homogeneous products refer to

A. products similar in nature.
B. the nonphysical nature of services and opposed to products.
C. great variation in the nature products.
D. products that can be inventoried.

16. In ____________ a single product is produced on a continuous basis.

A. process production
B. job production
C. job-order production
D. both a and c

17. A source document

A. is only an external document.
B. provides transaction data that can be recorded in a database.
C. is only used to record a transaction between an organization and an outside vendor.
D. is only an internal document.
18. Which of the following costs is usually NOT easily traceable to finished units of product?
A. direct labor
B. manufacturing overhead
C. direct materials
D. all of these

19. Manufacturing overhead consists of all

A. costs other than direct materials.
B. manufacturing costs other than direct materials.
C. costs other than direct materials and direct labor.
D. manufacturing costs other than direct materials and direct labor.

20. _______________ is the recognition and recording of costs.

A. Cost accumulation
B. Cost measurement
C. Cost assignment
D. Job order costing

21. _______________ involves determining the dollar amounts of direct materials, direct labor, and overhead
used in production.
A. Cost accumulation
B. Cost measurement
C. Cost assignment
D. Job order costing

22. An actual overhead rate can be calculated

A. at the beginning of the year.
B. at the end of each month.
C. at the beginning of each month.
D. either at the beginning of the year or at the beginning of the month.

23. Disadvantages of actual costing include

A. actual cost systems cannot provide accurate unit cost information on a timely basis.
B. actual cost systems produce unit costs that fluctuate from period to period.
C. estimates must be used when calculating the actual overhead rate.
D. both a and b.
24. The effect of uniform production levels on unit production costs can be achieved
A. by using a factory overhead rate based on different production levels for each year.
B. by using a factory overhead rate based on selling price.
C. by closing the factory overhead at the end of the accounting period.
D. by using a factory overhead rate based on long-run normal production activity level.

25. The predetermined overhead rate is usually calculated at the

A. end of each month.
B. beginning of each month.
C. beginning of the year.
D. end of the year.

26. Normal costing uses which cost in work in process?

A. applied direct materials
B. actual overhead
C. applied overhead
D. budgeted overhead

27. A normal costing system records which costs in work in process?

A. actual direct materials, actual direct labor, actual manufacturing overhead
B. applied direct materials, applied direct labor, applied manufacturing overhead
C. applied materials and labor and actual manufacturing overhead
D. actual materials and labor and applied overhead

28. The principal difficulty with normal costing is that

A. the unit cost information is not received on a timely basis.
B. it can result in fluctuating per-unit overhead costs.
C. estimated overhead and estimated activity are likely to differ from actual overhead and actual costs, resulting
in underapplied or overapplied overhead.
D. there is no difficulty associated with using normal costing.

29. Which of the following costing systems assigns actual costs of materials to inventory?
A. actual costing system
B. normal costing system
C. standard costing system
D. both a and b
30. _______________ is the association of production costs with the units produced.
A. Cost accumulation
B. Cost measurement
C. Cost assignment
D. Job-order costing

31. Unit cost information is needed for

A. costing inventory.
B. financial reporting requirements.
C. decision making.
D. all of these.

32. Unit costs are critical for

A. valuing inventory.
B. determining net income.
C. decisions to enter a new product line.
D. all of these.

33. Unit cost is important information for which of the following?

A. valuing inventory
B. determining income
C. decision making
D. all of these

34. In developing unit costs, overhead costs should be assigned using activity drivers. Which would be the
likely activity driver for a production process using a lathe?
A. units produced
B. direct labor hours
C. machine hours
D. direct materials cost

35. _______________ is the production level the firm expects to attain for the coming year.
A. Expected activity level
B. Normal activity level
C. Theoretical activity level
D. Practical activity level
36. _______________ is the average activity that a firm experiences in the long term (more than one year).
A. Expected activity level
B. Normal activity level
C. Theoretical activity level
D. Practical activity level

37. _______________ is the absolute maximum production activity of a manufacturing firm.

A. Expected activity level
B. Normal activity level
C. Theoretical activity level
D. Practical activity level

38. _______________ is the maximum output that can be realized if everything operates efficiently.
A. Expected activity level
B. Normal activity level
C. Theoretical activity level
D. Practical activity level

39. _______________ assign(s) costs by the job.

A. The process costing system
B. The job-order costing system
C. The project costing system
D. Both a and c

40. A job-order costing process would be most applicable for

A. a food processing plant.
B. a natural gas processing.
C. an airplane manufacturing.
D. fertilizer production.

41. The collection of all job cost sheets defines a

A. materials file.
B. finished goods file.
C. cost of goods file.
D. work-in-process file.
42. Which of the following items is a basic costing system record in a job-order costing system?
A. materials requisition form
B. job-order cost sheet
C. job time ticket
D. all of these

43. The _______________ serves as the document that identifies each job and accumulates its manufacturing
costs.
A. job-order cost sheet
B. control account
C. production order
D. bill of materials

44. The cost of direct materials is assigned to a job by the use of a source document known as a
A. job cost sheet.
B. control account.
C. production order.
D. materials requisition form.

45. A _______________ indicates the type and quantity of each material issued to the factory.
A. control account
B. materials requisition form
C. production list
D. work ticket

46. A work-in-process inventory file is

A. a file of electronic job-order cost sheets.
B. a file cabinet where work tickets are stored.
C. a file of electronic materials requisitions.
D. none of these.

47. Direct labor costs are assigned to individual jobs using a source document known as a
A. job-order cost sheet.
B. payroll check.
C. time sheet.
D. requisition form.
48. Figure 5 - 1

The King Corporation manufactures custom-made furniture. The following data pertains to Job X4A:

Direct materials placed into production $9,000

Direct labor hours worked 300 hours
Direct labor rate per hour $15
Machine hours worked 100 hours

Factory overhead rate is $22.50 per machine hour. Job X4A consists of 500 units.

Refer to Figure 5-1. One-half of Job X4A was sold for $10,000. What is the total amount of costs assigned to Job X4A?
A. $9,000
B. $20,250
C. $13,500
D. $15,750

49. Figure 5 - 1

The King Corporation manufactures custom-made furniture. The following data pertains to Job X4A:

Direct materials placed into production $9,000

Direct labor hours worked 300 hours
Direct labor rate per hour $15
Machine hours worked 100 hours

Factory overhead rate is $22.50 per machine hour. Job X4A consists of 500 units.

Refer to Figure 5-1. One-half of Job X4A was sold for $10,000. What is the cost per unit for Job X4A?
A. $18
B. $31.50
C. $27
D. $40.50

50. Figure 5 - 2

The Kraig Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production $4,000

Direct labor hours worked 50 hours
Direct labor rate per hour $ 15
Machine hours worked 100 hours
Factory overhead is applied using a plant-wide rate based on direct labor hours. Factory overhead was budgeted at $60,000 for the year and the
direct labor hours were estimated to be 15,000. Job XY5 consists of 50 units.

Refer to Figure 5-2. What is overhead cost assigned to Job XY5?

A. $200
B. $400
C. $750
D. $1,500

51. Figure 5 - 2

The Kraig Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production $4,000

Direct labor hours worked 50 hours
Direct labor rate per hour $ 15
Machine hours worked 100 hours

Factory overhead is applied using a plant-wide rate based on direct labor hours. Factory overhead was budgeted at $60,000 for the year and the
direct labor hours were estimated to be 15,000. Job XY5 consists of 50 units.

Refer to Figure 5-2. What is the materials cost per unit for Job XY5?
A. $4
B. $40
C. $80
D. $267

52. Figure 5 - 2

The Kraig Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production $4,000

Direct labor hours worked 50 hours
Direct labor rate per hour $ 15
Machine hours worked 100 hours

Factory overhead is applied using a plant-wide rate based on direct labor hours. Factory overhead was budgeted at $60,000 for the year and the
direct labor hours were estimated to be 15,000. Job XY5 consists of 50 units.

Refer to Figure 5-2. What is the labor cost per unit for Job XY5?
A. $4
B. $15
C. $0.80
D. $40
53. Figure 5 - 2

The Kraig Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production $4,000

Direct labor hours worked 50 hours
Direct labor rate per hour $ 15
Machine hours worked 100 hours

Factory overhead is applied using a plant-wide rate based on direct labor hours. Factory overhead was budgeted at $60,000 for the year and the
direct labor hours were estimated to be 15,000. Job XY5 consists of 50 units.

Refer to Figure 5-2. What the total cost assigned to Job XY5?
A. $5,1500
B. $4,400
C. $4,200
D. $4,950

54. Which of the following costs is NOT included on a job-order cost sheet?
A. direct material costs
B. applied factory overhead costs
C. direct labor costs
D. actual factory overhead costs

55. A debit to Materials Inventory indicates materials were

A. purchased.
B. requisitioned.
C. put into production.
D. ordered.
56. Figure 5 - 3

Olson Corporation constructs new homes. Assume that Olson uses a job costing system. During May 2011, the
following transactions occurred:

Olson purchased $4,500 of lumber on account.

Olson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.

Depreciation of $1,500 on equipment used to build new houses was recorded.

A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.

Refer to Figure 5-3. The journal entry to record the requisition of lumber for Olson would include a
A. debit to Work-in-Process of $4,500.
B. debit to Materials Inventory of $3,750.
C. credit to Finished Goods of $3,750.
D. debit to Work-in-Process of $3,750.

57. Figure 5 - 3

Olson Corporation constructs new homes. Assume that Olson uses a job costing system. During May 2011, the
following transactions occurred:

Olson purchased $4,500 of lumber on account.

Olson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.

Depreciation of $1,500 on equipment used to build new houses was recorded.

A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.

Refer to Figure 5-3. The journal entry to record labor for Olson would include a
A. debit to Finished Goods of $750.
B. debit to Wages Payable of $750.
C. credit to Finished Goods of $750.
D. debit to Work-in-Process of $750.
58. Figure 5 - 4

Walter Company uses a job-order costing system to account for product costs. The following information
pertains to 2011:

Materials placed into production $140,000

Indirect labor 40,000
Direct labor (10,000 hours) 160,000
Depreciation of factory building 60,000
Other factory overhead 100,000
Increase in work-in-process inventory 30,000

Factory overhead rate is $18 per direct labor hour.

Refer to Figure 5-4. What is the total amount credited to Materials Inventory for Walter in 2011?
A. $480,000
B. $170,000
C. $140,000
D. $110,000

59. Figure 5 - 4

Walter Company uses a job-order costing system to account for product costs. The following information
pertains to 2011:

Materials placed into production $140,000

Indirect labor 40,000
Direct labor (10,000 hours) 160,000
Depreciation of factory building 60,000
Other factory overhead 100,000
Increase in work-in-process inventory 30,000

Factory overhead rate is $18 per direct labor hour.

Refer to Figure 5-4. What is the total amount debited to Finished Goods Inventory in 2011?
A. $490,000
B. $510,000
C. $450,000
D. $550,000

60. A journal entry debiting Work-in-Process would normally NOT be accompanied by a credit to
A. Materials Inventory.
B. Finished Goods.
C. Overhead Control.
D. Wages Payable.
61. If there is a debit balance in overhead control, that implies
A. actual overhead costs exceed overhead applied.
B. applied overhead exceeds actual overhead.
C. actual overhead has not been closed to cost of goods sold.
D. none of these.

62. For a manufacturer, the three inventory accounts on the balance sheet are
A. Materials, Finished Goods, and Cost of Goods Sold.
B. Materials, Overhead, and Cost of Goods Sold.
C. Materials, Direct Labor, and Overhead.
D. Materials, Work-in-Process, and Finished Goods.

63. In a traditional enterprise, the flow of costs through the system is

A. materials inventory, work-in-process inventory, finished goods inventory, cost of goods sold.
B. materials inventory, work-in-process inventory, cost of goods sold, finished goods inventory.
C. work-in-process inventory, materials inventory, finished goods inventory, cost of goods sold.
D. work-in-process inventory, materials inventory, finished goods.

64. When normal costing is used, actual overhead costs are

A. recorded in the work-in-process account.
B. recorded in the overhead control account.
C. recorded in the finished goods account.
D. not recorded.

65. Carlson Company uses a predetermined rate to apply overhead. At the beginning of the year, Carlson
estimated its overhead costs at $240,000, direct labor hours at 40,000, and machine hours at 10,000. Actual
overhead costs incurred were $249,280, actual direct labor hours were 41,000, and actual machine hours were
11,000.

If the predetermined overhead rate is based on machine hours, what is the total amount credited to the factory
overhead account for the year for Carlson?
A. $249,280
B. $246,000
C. $240,000
D. $264,000
66. On April 9, 2011, Job XX4 was completed. The job cost sheet showed a total of $4,000 in direct materials
and $6,000 in direct labor at a rate of $20 per direct labor hour. Factory overhead is applied at $30 per direct
labor hour. The debit to Finished Goods Inventory to record the completion of Job XX4 is
A. $13,000.
B. $9,000.
C. $4,000.
D. $19,000.

67. Figure 5-5

Wright Corporation had the following information available for December 2011:

Work in Process, December 1 $20,000

Materials placed into production, December 27,500
Direct labor, December 37,500

Factory overhead rate is 150 percent of direct labor costs.

Job cost sheets had the following balances:

Job Z1 $32,500
Job Z2 55,000
Job Z3 35,000
Job Z4 18,750

Jobs Z3 and Z4 were not completed at the end of December.

Refer to Figure 5-5. What is the balance in Work-in-Process for Wright at the end of December?
A. $85,000
B. $87,500
C. $56,250
D. $53,750

68. Figure 5-5

Wright Corporation had the following information available for December 2011:

Work in Process, December 1 $20,000

Materials placed into production, December 27,500
Direct labor, December 37,500

Factory overhead rate is 150 percent of direct labor costs.

Job cost sheets had the following balances:

Job Z1 $32,500
Job Z2 55,000
Job Z3 35,000
Job Z4 18,750
Jobs Z3 and Z4 were not completed at the end of December.

Refer to Figure 5-5. What is the cost of goods finished during December for Wright Corporation?
A. $85,000
B. $87,500
C. $56,250
D. $53,750

69. Figure 5 - 6

In the Mains Company, the following Job cards were totaled at the end of the month:
Job 243 $5,750
Job 244 $4,980
Job 245 $3,675
Job 246 $4,250
Job 247 $5,100
Job 248 $3,800

Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in
Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of
the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to
finished goods.

Refer to Figure 5-6. What is the cost of goods sold for the month?

A. $10,730
B. $10,850
C. $12,575
D. none of these
70. Figure 5 - 6

In the Mains Company, the following Job cards were totaled at the end of the month:
Job 243 $5,750
Job 244 $4,980
Job 245 $3,675
Job 246 $4,250
Job 247 $5,100
Job 248 $3,800

Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in
Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of
the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to
finished goods.

Refer to Figure 5-6. What is the ending work-in-process inventory for the month?

A. $10,730
B. $4,250
C. $12,575
D. none of these

71. Figure 5 - 6

In the Mains Company, the following Job cards were totaled at the end of the month:
Job 243 $5,750
Job 244 $4,980
Job 245 $3,675
Job 246 $4,250
Job 247 $5,100
Job 248 $3,800

Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in
Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of
the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to
finished goods.

Refer to Figure 5-6. What is the cost of goods manufactured for the month?

A. $10,730
B. $10,850
C. $12,575
D. none of these
72. Russell Company has the following data pertaining to 2011:

Beginning materials inventory $ 50,000

Beginning work-in-process inventory -0-
Beginning finished goods inventory -0-
Materials placed into production 125,000
Materials purchased on account 137,500
Direct labor incurred (10,000 hours) 62,500
Cost of goods completed (Job BB8) 25,000

Factory overhead rate is 125 percent of direct labor costs.

What is the ending materials inventory balance for Russell in 2011?

A. $50,000
B. $62,500
C. $12,500
D. $37,500

73. Smith Company has the following selected debit balance accounts at the end of the current year: Work-in-
Process, $25,000; Finished Goods, $12,500; Cost of Goods Sold, $37,500; and Factory Overhead, $6,000. The
pro-rated amount charged to Cost of Goods Sold for factory overhead will be
A. $25,000.
B. $3,000.
C. $37,500.
D. $6,000.

74. Under normal costing, which of the following statements is true regarding factory overhead?
A. The balance in factory overhead at the end of the accounting period is closed.
B. Different overhead rates are used for different quantities of predicted activity.
C. The balance in factory overhead at the end of the accounting period is kept open.
D. The immaterial balance in factory overhead at the end of the accounting period is allocated to the cost of
goods sold and inventory accounts.

75. Total manufacturing-related costs incurred for Miller Company in October for all jobs is as follows:

Direct materials $ 900

Insurance-factory building 150
Direct labor 1,200
Property taxes-factory building 400
Other factory overhead costs 1,450
Factory overhead applied 1,650
Assuming Miller uses a normal costing system and applies overhead based on a predetermined rate, what is the credit to Overhead Control to close
the account at the end of the year?
A. $900
B. $350
C. $1,450
D. $1,650

76. Which of the following transactions in a job-order costing system requires the procedure of merely moving
a job-order cost sheet from one file to another?
A. applying factory overhead to jobs
B. closing overapplied factory overhead
C. delivering a completed job to a customer
D. moving the job from one production department to another

77. Figure 5-7

The following information is available pertaining to the Production Division:

Mixing Dept. Finishing Dept. Total

Overhead costs $7,500 $22,500 $30,000
Direct labor hours 7,500 2,500 10,000
Machine hours 2,500 7,500 10,000

Production information pertaining to Job 4X5:

Mixing Dept. Finishing Dept. Total

Prime costs $1,250 $-0- $1,250
Direct labor hours 250 -0- 250
Machine hours 1 -0- 1
Units produced 500 -0- 500

Refer to Figure 5-7. What is the plantwide overhead rate based on direct labor hours?
A. $3.00
B. $1.50
C. $9.00
D. $1.00
78. Figure 5-7

The following information is available pertaining to the Production Division:

Mixing Dept. Finishing Dept. Total

Overhead costs $7,500 $22,500 $30,000
Direct labor hours 7,500 2,500 10,000
Machine hours 2,500 7,500 10,000

Production information pertaining to Job 4X5:

Mixing Dept. Finishing Dept. Total

Prime costs $1,250 $-0- $1,250
Direct labor hours 250 -0- 250
Machine hours 1 -0- 1
Units produced 500 -0- 500

Refer to Figure 5-7. Using the plantwide overhead rate based on direct labor hours what is the cost of Job 4X5?
A. $1,250
B. $2,000
C. $8,750
D. $31,250

79. Figure 5-7

The following information is available pertaining to the Production Division:

Mixing Dept. Finishing Dept. Total

Overhead costs $7,500 $22,500 $30,000
Direct labor hours 7,500 2,500 10,000
Machine hours 2,500 7,500 10,000

Production information pertaining to Job 4X5:

Mixing Dept. Finishing Dept. Total

Prime costs $1,250 $-0- $1,250
Direct labor hours 250 -0- 250
Machine hours 1 -0- 1
Units produced 500 -0- 500

Refer to Figure 5-7. What is the overhead rate for the Finishing Department based on machine hours?
A. $9.00
B. $3.00
C. $2.25
D. $1.00
80. Figure 5-7

The following information is available pertaining to the Production Division:

Mixing Dept. Finishing Dept. Total

Overhead costs $7,500 $22,500 $30,000
Direct labor hours 7,500 2,500 10,000
Machine hours 2,500 7,500 10,000

Production information pertaining to Job 4X5:

Mixing Dept. Finishing Dept. Total

Prime costs $1,250 $-0- $1,250
Direct labor hours 250 -0- 250
Machine hours 1 -0- 1
Units produced 500 -0- 500

Refer to Figure 5-7. Based on departmental overhead rates, what is the cost of Job 4X5? Departmental overhead notes for the Mixing Department are
based on direct labor hours, while departmental overhead rates for the Finishing Department are based on machine hours.
A. $31,250
B. $8,750
C. $2,000
D. $1,250

81. Figure 5-7

The following information is available pertaining to the Production Division:

Mixing Dept. Finishing Dept. Total

Overhead costs $7,500 $22,500 $30,000
Direct labor hours 7,500 2,500 10,000
Machine hours 2,500 7,500 10,000

Production information pertaining to Job 4X5:

Mixing Dept. Finishing Dept. Total

Prime costs $1,250 $-0- $1,250
Direct labor hours 250 -0- 250
Machine hours 1 -0- 1
Units produced 500 -0- 500

Refer to Figure 5-7. What are the total overhead costs assigned to Job 4X5, assuming the Mixing and Finishing Departments use direct labor hours
and machine hours for their bases, respectively?
A. $62.50
B. $1,500.00
C. $750.00
D. $250.00
82. The cost of spoilage is added to a job when it is considered to be
A. a result of the process, no matter what job is being worked on.
B. a normal consequence of working on that job.
C. abnormal.
D. all of these.

83. In a job-order costing system, if costs are incurred to rework a job due to inadequate training of personnel,
these costs would be
A. debited to manufacturing overhead control.
B. debited to the job.
C. credited to manufacturing overhead control.
D. credited to the cost of goods sold.

84. Figure 5 - 8

Griswold Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs.
The following overhead activities were budgeted for the year.

Activity Cost Driver Amount of driver

setups $ 240,000 number of setups 6,000
purchasing 160,000 number of parts 20,000
other overhead 300,000 direct labor hours 80,000

The following information about the jobs was given for September.

Job 101 Job 102 Job 103 Job 104

Balance 9/1 $64,900 $40,770 $30,500 0
direct materials 54,000 37,900 25,000 11,000
direct labor 80,000 38,500 43,000 21,000
number of setups 40 10 30 200
number of parts 300 80 400 500
direct labor hours 5,000 2,400 5,200 1,200

By September 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. What is the activity rate for purchasing?

A. $ 1.25
B. $ 3.75
C. $ 8
D. $ 40
85. Figure 5 - 8

Griswold Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs.
The following overhead activities were budgeted for the year.

Activity Cost Driver Amount of driver

setups $ 240,000 number of setups 6,000
purchasing 160,000 number of parts 20,000
other overhead 300,000 direct labor hours 80,000

The following information about the jobs was given for September.

Job 101 Job 102 Job 103 Job 104

Balance 9/1 $64,900 $40,770 $30,500 0
direct materials 54,000 37,900 25,000 11,000
direct labor 80,000 38,500 43,000 21,000
number of setups 40 10 30 200
number of parts 300 80 400 500
direct labor hours 5,000 2,400 5,200 1,200

By September 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. What is the cost of job 102?

A. $ 86,440
B. $ 127,210
C. $ 117,170
D. none of these

86. Figure 5 - 8

Griswold Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs.
The following overhead activities were budgeted for the year.

Activity Cost Driver Amount of driver

setups $ 240,000 number of setups 6,000
purchasing 160,000 number of parts 20,000
other overhead 300,000 direct labor hours 80,000

The following information about the jobs was given for September.

Job 101 Job 102 Job 103 Job 104

Balance 9/1 $64,900 $40,770 $30,500 0
direct materials 54,000 37,900 25,000 11,000
direct labor 80,000 38,500 43,000 21,000
number of setups 40 10 30 200
number of parts 300 80 400 500
direct labor hours 5,000 2,400 5,200 1,200
By September 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. What is the cost of goods manufactured?

A. $ 144,400
B. $ 215,670
C. $ 178,340
D. $ 249,610

87. Figure 5 - 8

Griswold Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs.
The following overhead activities were budgeted for the year.

Activity Cost Driver Amount of driver

setups $ 240,000 number of setups 6,000
purchasing 160,000 number of parts 20,000
other overhead 300,000 direct labor hours 80,000

The following information about the jobs was given for September.

Job 101 Job 102 Job 103 Job 104

Balance 9/1 $64,900 $40,770 $30,500 0
direct materials 54,000 37,900 25,000 11,000
direct labor 80,000 38,500 43,000 21,000
number of setups 40 10 30 200
number of parts 300 80 400 500
direct labor hours 5,000 2,400 5,200 1,200

By September 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. The ending work in process would consist of the costs of what jobs?
A. Job 102 + Job 103
B. Job 101 + Job 104
C. Job 101 + Job 102 + Job 103 + Job 104
D. Job 101 + Job 102 + Job 103

88. Figure 5 - 8

Griswold Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs.
The following overhead activities were budgeted for the year.

Activity Cost Driver Amount of driver

setups $ 240,000 number of setups 6,000
purchasing 160,000 number of parts 20,000
other overhead 300,000 direct labor hours 80,000
The following information about the jobs was given for September.

Job 101 Job 102 Job 103 Job 104

Balance 9/1 $64,900 $40,770 $30,500 0
direct materials 54,000 37,900 25,000 11,000
direct labor 80,000 38,500 43,000 21,000
number of setups 40 10 30 200
number of parts 300 80 400 500
direct labor hours 5,000 2,400 5,200 1,200

By September 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. The cost of goods sold would consist of the costs of what jobs?
A. Job 102 + Job 103
B. Job 101 + Job 104
C. Job 101 + Job 102 + Job 103 + Job 104
D. Job 101 + Job 102 + Job 103

89. Figure 5-9

Alpha Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It
requires the following:
direct materials $3,000
direct labor ($10/hr) 1,000
overhead (150% DL$) 1,500
After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the spoilage was considered normal, what is the cost of job 492?
A. $5,640
B. $5,760
C. $5,500
D. $3,000
90. Figure 5-9

Alpha Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It
requires the following:
direct materials $3,000
direct labor ($10/hr) 1,000
overhead (150% DL$) 1,500
After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the rework is considered normal spoilage, what is the journal entry for overhead
control?
A. overhead control $ 140
materials $60
payroll $80
B. materials $ 60
payroll $80
overhead control $140
C. no journal entry is needed
D. none of these

91. Figure 5-9

Alpha Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It
requires the following:
direct materials $3,000
direct labor ($10/hr) 1,000
overhead (150% DL$) 1,500
After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the rework is considered abnormal spoilage, what is the journal entry for overhead
control?
A. overhead control $ 140
materials $60
payroll $80
B. materials $ 60
payroll $80
overhead control $140
C. no journal entry is needed
D. none of these
92. Figure 5-9

Alpha Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It
requires the following:
direct materials $3,000
direct labor ($10/hr) 1,000
overhead (150% DL$) 1,500
After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the rework is considered abnormal spoilage, what is the cost of job 492?
A. $5,500
B. $6,740
C. $3,140
D. $5,640

93. Compare and contrast perishability and intangibility in an automobile oil lubrication shop and architectural
design firms.

94. What is the most important factor that causes service firms to generally rank lower in customer satisfaction
than manufacturing firms?

95. Explain why actual costing systems are rarely used in practice.
96. Why are firms reluctant to use actual costing? How does normal costing solve the problems?

97. Why are unit costs important? Why do full-cost unit costs change from accounting period to accounting
period.

98. What are the source documents used in a job-order costing system? How do the source documents relate to
the job cost sheet? How do these documents inform work in process?

99. Jocarro Company has a job costing system. The following items appeared in the Work-in-Process account
during February 2011:

February 1, 2011, balance $20,000

Materials placed into production ?
Direct labor (4,000 hours) $120,000
Factory overhead applied $96,000
Cost of goods manufactured $400,000
February 28, 2011, balance $16,000
Jocarro applies overhead to production on the basis of direct labor hours. Job XX, the only job in process on February 28, has been charged $10,600
materials cost and has 100 labor hours of direct labor time assigned to it.

Required:

a. Determine the predetermined factory overhead rate for Jocarro Company.

b. Determine the amounts of materials, direct labor, and factory overhead included in the
February 28, 2011, work in process.

c. Determine the amount of materials placed into production during February 2011.
100. Reed Incorporated uses a job-order costing system and a predetermined overhead rate based on machine
hours.

At the beginning of the year, the company estimated manufacturing overhead for the year would be $240,000
and machine hours would be 8,000.

The following information pertains to December of the current year:

Job 10 Job 11 Job 12 Total

Work-in-process, Dec. 1 $16,000 $26,000 $38,000 $80,000

December production activity:

Materials requisitioned $4,000 $4,800 $7,200 $16,000
Direct labor cost $2,400 $3,600 $4,000 $10,000
Machine hours 400 700 900 2,000
Labor hours 120 180 200 500

Actual manufacturing overhead cost incurred in December was $61,000.

Required:

a. Compute the predetermined overhead application rate.

b. Determine the total cost associated with each job.

c. If jobs 10 and 12 were completed, prepared the journal entry to move the cost.

d. If job 10 was delivered to customers that paid $50,000 cash, prepare the journal
entries.
What is the gross profit for job 10?

e. Assuming no beginning work in process, what is the cost assigned to ending work in
process?

f. Assuming no beginning finished goods what is the cost assigned to ending finished goods?

g. How much was overhead over/underapplied?

101. Wolf Company had the following selected account balances at the end of 2011:

Work in Process $120,000

Finished Goods 150,000
Cost of Goods Sold 180,000
Factory Overhead (overapplied) 63,000

Required:

a. Prepare the journal entry to dispose of the factory overhead balance assuming it is written off to Cost of Goods Sold.
b. Prepare the journal entry to dispose of the factory overhead balance assuming it is allocated among Work in Process, Finished Goods, and
Cost of Goods Sold based on ending balances.
c. Which method of disposing of under- or overapplied factory overhead cost is more accurate? Explain.

102. Selected account balances of Howard Company for 2011 are as follows:

Work in Process $35,000 Debit

Finished Goods $65,000 Debit
Cost of Goods Sold $100,000 Debit
Factory Overhead $22,000 Debit

Required:

a. Were factory overhead costs underapplied or overapplied in 2011? Explain.

b. Prepare the journal entry to dispose of the factory overhead balance assuming the amount is immaterial.
c. Prepare the journal entry to dispose of the factory overhead balance using the allocation method.
103. The following information was taken from the job cost sheet for Job 101 for Scott Manufacturing
Company:

Date started: July 5, 2011

Date completed: August 21, 2011

Direct Direct Factory Job

Date Materials Labor Overhead Total
7-05-09 $3,000
7-15-09 $ 900 $450
7-17-09 1,500
7-22-09 1,350 675
8-01-09 1,500
8-21-09 600 300

Job 101 was sold on account on August 25, 2011, for 160 percent of its cost.

Required:

a. Prepare the journal entries to record the costs incurred for Job 101 in 2011 for direct materials, direct labor, and factory overhead.
b. Prepare the journal entry to record the completion of Job 101.
c. What is the predetermined factory overhead rate for Scott?
d. Prepare the journal entries to record the sale of Job 101.

104. Moore Company completed the following transactions with respect to its manufacturing operations during
December 2011:

a. Materials costing $140,000 and indirect materials costing $16,800 were purchased on account. Assume indirect materials was debited to
materials.
b. A total of $70,000 of materials was requisitioned to the factory for manufacturing operations conducted during December.
c. Manufacturing payroll for the month consisted of 2,000 hours of direct labor and 500 hours of indirect labor, both at $14 per hour.
d. Indirect materials costing $7,000 were requisitioned.
e. Depreciation on the factory building and equipment was $14,000.
f. Miscellaneous factory overhead expenses totaled $5,600 for December.
g. Factory overhead cost was applied to work in process at the rate of 125 percent of direct labor costs.
h. Units of product with a total manufacturing cost of $84,000 were completed and transferred to the finished goods warehouse.
i. Finished goods costing $49,000 were sold during December for $77,000.
Required:

Prepare journal entries for each of the transactions that occurred during December 2011.

105. Dobro Company has two production departments: A and B. Dobro has following budgeted overhead costs
and activity:

Overhead costs Direct labor hours Machine hours

Department A $ 50,000 10,000 5,000
Department B 175,000 5,000 25,000
Total $250,000 15,000 30,000

Production data for job 20 and 21 are given below:

Job 20 Job 21
Dept A Dept B Dept A Dept B
Prime costs $7,000 $12,000 $22,000 $30,000
Direct labor hours 50 5 60 5
Machine hours 10 40 10 50

Job 20 Job 21
Units produced 100 100

Required:

a. Compare the costs per unit of Job 20 if Dobro uses

1. a plantwide rate based on direct labor hours;
2. a plantwide rate based on machine hours;
3. departmental rates with Department A based on direct
labor hours and Department B using machine hours.
(round to 2 decimal places)
b. Why is there such a variation in the cost per unit? Which method provides the best
cost assignment?
106. Highland Corporation is a job order costing company that uses activity-based costing to apply overhead to
jobs. The following overhead activities were budgeted for the year.

Activity Cost Driver Amount of driver

setups $ 120,000 number of setups 6,000
purchasing 80,000 number of parts 20,000
other overhead 150,000 direct labor hours 75,000

The following information about the jobs was given for October.

Job 1001 Job 1002 Job 1003 Job 1004

Balance 10/1 $44,900 $60,700 $30,500 0
direct materials 54,000 37,000 25,000 41,000
direct labor 80,000 38,500 43,000 71,000
number of setups 40 10 30 200
number of parts 300 180 400 500
direct labor hours 5,000 2,400 5,200 1,200

By October 31, Jobs 1001 and 1003 were completed and sold. The remaining jobs were still in process.

Required:
1. Calculate the activity rates for each overhead activity.
2. Calculate the cost of each job for October 31.
3. What is the beginning work in process on October 1 and November 1?
4. What is the cost of goods manufactured?
5. What is the cost of goods sold?
6. Draw the T account for work in process. (include all debits and credits) Prepare the Statement of the Cost of Goods Manufactured.

WIP
___________________________________________
BI |
DM |
DL |
MOH |
_________________ |__________________________
EI
Chapter 5--Product and Service Costing: Job-Order System Key

1. Which of the following is a pure service?

A. bungee jumping
B. beauty salon
C. restaurant
D. software

2. A pure service organization has

A. no raw materials, no inventories, and a definite separation between the plant and the customer.
B. raw materials, tangible items, and no separation between the plant and the customer.
C. no raw materials, no tangible items, and no separation between the plant and the customer.
D. none of these.

3. Which of the following is a manufactured product?

A. bungee jumping
B. beauty salon
C. restaurant
D. automobile

4. Inseparability refers to the

A. nonphysical nature of services as opposed to products.
B. fact that production and consumption are inseparable for services.
C. greater chances for variation in the performance of services than in the production of products.
D. fact that services cannot be inventoried but must be consumed when performed.

5. Heterogeneity refers to the

A. nonphysical nature of services as opposed to products.
B. fact that production and consumption are inseparable for services.
C. greater chances for variation in the performance of services than in the production of products.
D. fact that services cannot be inventoried but must be consumed when performed.
6. Intangibility refers to the
A. nonphysical nature of services as opposed to products.
B. fact that production and consumption are inseparable for services.
C. greater chances for variation in the performance of services than in the production of products.
D. fact that services cannot be inventoried but must be consumed when performed.

7. Perishability refers to the

A. nonphysical nature of services as opposed to products.
B. fact that production and consumption are inseparable for services.
C. greater chances for variation in the performance of services than in the production of products.
D. fact that services cannot be inventoried but must be consumed when performed.

8. Which of the following firms would make extensive use of service costing?
A. auto manufacturer
B. furniture manufacturer
C. auto dealer
D. CPA firm

9. Manufacturers producing unique or customized products would employ a(n)

A. process costing system.
B. job-costing system.
C. homogeneous costing system.
D. all of these.

10. Which of the following products would NOT use job-order costing?
A. houses
B. chemicals
C. ships
D. custom-built furniture

11. Which of the following firms would make extensive use of a job-order costing?
A. dental and medical services
B. canned foods
C. discount brokers
D. petroleum
12. Process costing would be most applicable for
A. an electronics producer.
B. custom machining.
C. high rise building construction.
D. CPA audits.

13. Which of the following would NOT use a process costing system?
A. electrical wire
B. cotton yarn
C. newsprint
D. satellites

14. Which cost accounting process would be most appropriate for accumulating costs of identical, standardized
units?
A. job-order costing
B. process costing
C. normal costing
D. standard costing

15. Homogeneous products refer to

A. products similar in nature.
B. the nonphysical nature of services and opposed to products.
C. great variation in the nature products.
D. products that can be inventoried.

16. In ____________ a single product is produced on a continuous basis.

A. process production
B. job production
C. job-order production
D. both a and c

17. A source document

A. is only an external document.
B. provides transaction data that can be recorded in a database.
C. is only used to record a transaction between an organization and an outside vendor.
D. is only an internal document.
18. Which of the following costs is usually NOT easily traceable to finished units of product?
A. direct labor
B. manufacturing overhead
C. direct materials
D. all of these

19. Manufacturing overhead consists of all

A. costs other than direct materials.
B. manufacturing costs other than direct materials.
C. costs other than direct materials and direct labor.
D. manufacturing costs other than direct materials and direct labor.

20. _______________ is the recognition and recording of costs.

A. Cost accumulation
B. Cost measurement
C. Cost assignment
D. Job order costing

21. _______________ involves determining the dollar amounts of direct materials, direct labor, and overhead
used in production.
A. Cost accumulation
B. Cost measurement
C. Cost assignment
D. Job order costing

22. An actual overhead rate can be calculated

A. at the beginning of the year.
B. at the end of each month.
C. at the beginning of each month.
D. either at the beginning of the year or at the beginning of the month.

23. Disadvantages of actual costing include

A. actual cost systems cannot provide accurate unit cost information on a timely basis.
B. actual cost systems produce unit costs that fluctuate from period to period.
C. estimates must be used when calculating the actual overhead rate.
D. both a and b.
24. The effect of uniform production levels on unit production costs can be achieved
A. by using a factory overhead rate based on different production levels for each year.
B. by using a factory overhead rate based on selling price.
C. by closing the factory overhead at the end of the accounting period.
D. by using a factory overhead rate based on long-run normal production activity level.

25. The predetermined overhead rate is usually calculated at the

A. end of each month.
B. beginning of each month.
C. beginning of the year.
D. end of the year.

26. Normal costing uses which cost in work in process?

A. applied direct materials
B. actual overhead
C. applied overhead
D. budgeted overhead

27. A normal costing system records which costs in work in process?

A. actual direct materials, actual direct labor, actual manufacturing overhead
B. applied direct materials, applied direct labor, applied manufacturing overhead
C. applied materials and labor and actual manufacturing overhead
D. actual materials and labor and applied overhead

28. The principal difficulty with normal costing is that

A. the unit cost information is not received on a timely basis.
B. it can result in fluctuating per-unit overhead costs.
C. estimated overhead and estimated activity are likely to differ from actual overhead and actual costs, resulting
in underapplied or overapplied overhead.
D. there is no difficulty associated with using normal costing.

29. Which of the following costing systems assigns actual costs of materials to inventory?
A. actual costing system
B. normal costing system
C. standard costing system
D. both a and b
30. _______________ is the association of production costs with the units produced.
A. Cost accumulation
B. Cost measurement
C. Cost assignment
D. Job-order costing

31. Unit cost information is needed for

A. costing inventory.
B. financial reporting requirements.
C. decision making.
D. all of these.

32. Unit costs are critical for

A. valuing inventory.
B. determining net income.
C. decisions to enter a new product line.
D. all of these.

33. Unit cost is important information for which of the following?

A. valuing inventory
B. determining income
C. decision making
D. all of these

34. In developing unit costs, overhead costs should be assigned using activity drivers. Which would be the
likely activity driver for a production process using a lathe?
A. units produced
B. direct labor hours
C. machine hours
D. direct materials cost

35. _______________ is the production level the firm expects to attain for the coming year.
A. Expected activity level
B. Normal activity level
C. Theoretical activity level
D. Practical activity level
36. _______________ is the average activity that a firm experiences in the long term (more than one year).
A. Expected activity level
B. Normal activity level
C. Theoretical activity level
D. Practical activity level

37. _______________ is the absolute maximum production activity of a manufacturing firm.

A. Expected activity level
B. Normal activity level
C. Theoretical activity level
D. Practical activity level

38. _______________ is the maximum output that can be realized if everything operates efficiently.
A. Expected activity level
B. Normal activity level
C. Theoretical activity level
D. Practical activity level

39. _______________ assign(s) costs by the job.

A. The process costing system
B. The job-order costing system
C. The project costing system
D. Both a and c

40. A job-order costing process would be most applicable for

A. a food processing plant.
B. a natural gas processing.
C. an airplane manufacturing.
D. fertilizer production.

41. The collection of all job cost sheets defines a

A. materials file.
B. finished goods file.
C. cost of goods file.
D. work-in-process file.
42. Which of the following items is a basic costing system record in a job-order costing system?
A. materials requisition form
B. job-order cost sheet
C. job time ticket
D. all of these

43. The _______________ serves as the document that identifies each job and accumulates its manufacturing
costs.
A. job-order cost sheet
B. control account
C. production order
D. bill of materials

44. The cost of direct materials is assigned to a job by the use of a source document known as a
A. job cost sheet.
B. control account.
C. production order.
D. materials requisition form.

45. A _______________ indicates the type and quantity of each material issued to the factory.
A. control account
B. materials requisition form
C. production list
D. work ticket

46. A work-in-process inventory file is

A. a file of electronic job-order cost sheets.
B. a file cabinet where work tickets are stored.
C. a file of electronic materials requisitions.
D. none of these.

47. Direct labor costs are assigned to individual jobs using a source document known as a
A. job-order cost sheet.
B. payroll check.
C. time sheet.
D. requisition form.
48. Figure 5 - 1

The King Corporation manufactures custom-made furniture. The following data pertains to Job X4A:

Direct materials placed into production $9,000

Direct labor hours worked 300 hours
Direct labor rate per hour $15
Machine hours worked 100 hours

Factory overhead rate is $22.50 per machine hour. Job X4A consists of 500 units.

Refer to Figure 5-1. One-half of Job X4A was sold for $10,000. What is the total amount of costs assigned to Job X4A?
A. $9,000
B. $20,250
C. $13,500
D. $15,750

49. Figure 5 - 1

The King Corporation manufactures custom-made furniture. The following data pertains to Job X4A:

Direct materials placed into production $9,000

Direct labor hours worked 300 hours
Direct labor rate per hour $15
Machine hours worked 100 hours

Factory overhead rate is $22.50 per machine hour. Job X4A consists of 500 units.

Refer to Figure 5-1. One-half of Job X4A was sold for $10,000. What is the cost per unit for Job X4A?
A. $18
B. $31.50
C. $27
D. $40.50

50. Figure 5 - 2

The Kraig Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production $4,000

Direct labor hours worked 50 hours
Direct labor rate per hour $ 15
Machine hours worked 100 hours
Factory overhead is applied using a plant-wide rate based on direct labor hours. Factory overhead was budgeted at $60,000 for the year and the
direct labor hours were estimated to be 15,000. Job XY5 consists of 50 units.

Refer to Figure 5-2. What is overhead cost assigned to Job XY5?

A. $200
B. $400
C. $750
D. $1,500

51. Figure 5 - 2

The Kraig Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production $4,000

Direct labor hours worked 50 hours
Direct labor rate per hour $ 15
Machine hours worked 100 hours

Factory overhead is applied using a plant-wide rate based on direct labor hours. Factory overhead was budgeted at $60,000 for the year and the
direct labor hours were estimated to be 15,000. Job XY5 consists of 50 units.

Refer to Figure 5-2. What is the materials cost per unit for Job XY5?
A. $4
B. $40
C. $80
D. $267

52. Figure 5 - 2

The Kraig Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production $4,000

Direct labor hours worked 50 hours
Direct labor rate per hour $ 15
Machine hours worked 100 hours

Factory overhead is applied using a plant-wide rate based on direct labor hours. Factory overhead was budgeted at $60,000 for the year and the
direct labor hours were estimated to be 15,000. Job XY5 consists of 50 units.

Refer to Figure 5-2. What is the labor cost per unit for Job XY5?
A. $4
B. $15
C. $0.80
D. $40
53. Figure 5 - 2

The Kraig Corporation manufactures custom-made purses. The following data pertains to Job XY5:

Direct materials placed into production $4,000

Direct labor hours worked 50 hours
Direct labor rate per hour $ 15
Machine hours worked 100 hours

Factory overhead is applied using a plant-wide rate based on direct labor hours. Factory overhead was budgeted at $60,000 for the year and the
direct labor hours were estimated to be 15,000. Job XY5 consists of 50 units.

Refer to Figure 5-2. What the total cost assigned to Job XY5?
A. $5,1500
B. $4,400
C. $4,200
D. $4,950

54. Which of the following costs is NOT included on a job-order cost sheet?
A. direct material costs
B. applied factory overhead costs
C. direct labor costs
D. actual factory overhead costs

55. A debit to Materials Inventory indicates materials were

A. purchased.
B. requisitioned.
C. put into production.
D. ordered.
56. Figure 5 - 3

Olson Corporation constructs new homes. Assume that Olson uses a job costing system. During May 2011, the
following transactions occurred:

Olson purchased $4,500 of lumber on account.

Olson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.

Depreciation of $1,500 on equipment used to build new houses was recorded.

A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.

Refer to Figure 5-3. The journal entry to record the requisition of lumber for Olson would include a
A. debit to Work-in-Process of $4,500.
B. debit to Materials Inventory of $3,750.
C. credit to Finished Goods of $3,750.
D. debit to Work-in-Process of $3,750.

57. Figure 5 - 3

Olson Corporation constructs new homes. Assume that Olson uses a job costing system. During May 2011, the
following transactions occurred:

Olson purchased $4,500 of lumber on account.

Olson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.

Depreciation of $1,500 on equipment used to build new houses was recorded.

A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.

Refer to Figure 5-3. The journal entry to record labor for Olson would include a
A. debit to Finished Goods of $750.
B. debit to Wages Payable of $750.
C. credit to Finished Goods of $750.
D. debit to Work-in-Process of $750.
58. Figure 5 - 4

Walter Company uses a job-order costing system to account for product costs. The following information
pertains to 2011:

Materials placed into production $140,000

Indirect labor 40,000
Direct labor (10,000 hours) 160,000
Depreciation of factory building 60,000
Other factory overhead 100,000
Increase in work-in-process inventory 30,000

Factory overhead rate is $18 per direct labor hour.

Refer to Figure 5-4. What is the total amount credited to Materials Inventory for Walter in 2011?
A. $480,000
B. $170,000
C. $140,000
D. $110,000

59. Figure 5 - 4

Walter Company uses a job-order costing system to account for product costs. The following information
pertains to 2011:

Materials placed into production $140,000

Indirect labor 40,000
Direct labor (10,000 hours) 160,000
Depreciation of factory building 60,000
Other factory overhead 100,000
Increase in work-in-process inventory 30,000

Factory overhead rate is $18 per direct labor hour.

Refer to Figure 5-4. What is the total amount debited to Finished Goods Inventory in 2011?
A. $490,000
B. $510,000
C. $450,000
D. $550,000

60. A journal entry debiting Work-in-Process would normally NOT be accompanied by a credit to
A. Materials Inventory.
B. Finished Goods.
C. Overhead Control.
D. Wages Payable.
61. If there is a debit balance in overhead control, that implies
A. actual overhead costs exceed overhead applied.
B. applied overhead exceeds actual overhead.
C. actual overhead has not been closed to cost of goods sold.
D. none of these.

62. For a manufacturer, the three inventory accounts on the balance sheet are
A. Materials, Finished Goods, and Cost of Goods Sold.
B. Materials, Overhead, and Cost of Goods Sold.
C. Materials, Direct Labor, and Overhead.
D. Materials, Work-in-Process, and Finished Goods.

63. In a traditional enterprise, the flow of costs through the system is

A. materials inventory, work-in-process inventory, finished goods inventory, cost of goods sold.
B. materials inventory, work-in-process inventory, cost of goods sold, finished goods inventory.
C. work-in-process inventory, materials inventory, finished goods inventory, cost of goods sold.
D. work-in-process inventory, materials inventory, finished goods.

64. When normal costing is used, actual overhead costs are

A. recorded in the work-in-process account.
B. recorded in the overhead control account.
C. recorded in the finished goods account.
D. not recorded.

65. Carlson Company uses a predetermined rate to apply overhead. At the beginning of the year, Carlson
estimated its overhead costs at $240,000, direct labor hours at 40,000, and machine hours at 10,000. Actual
overhead costs incurred were $249,280, actual direct labor hours were 41,000, and actual machine hours were
11,000.

If the predetermined overhead rate is based on machine hours, what is the total amount credited to the factory
overhead account for the year for Carlson?
A. $249,280
B. $246,000
C. $240,000
D. $264,000
66. On April 9, 2011, Job XX4 was completed. The job cost sheet showed a total of $4,000 in direct materials
and $6,000 in direct labor at a rate of $20 per direct labor hour. Factory overhead is applied at $30 per direct
labor hour. The debit to Finished Goods Inventory to record the completion of Job XX4 is
A. $13,000.
B. $9,000.
C. $4,000.
D. $19,000.

67. Figure 5-5

Wright Corporation had the following information available for December 2011:

Work in Process, December 1 $20,000

Materials placed into production, December 27,500
Direct labor, December 37,500

Factory overhead rate is 150 percent of direct labor costs.

Job cost sheets had the following balances:

Job Z1 $32,500
Job Z2 55,000
Job Z3 35,000
Job Z4 18,750

Jobs Z3 and Z4 were not completed at the end of December.

Refer to Figure 5-5. What is the balance in Work-in-Process for Wright at the end of December?
A. $85,000
B. $87,500
C. $56,250
D. $53,750

68. Figure 5-5

Wright Corporation had the following information available for December 2011:

Work in Process, December 1 $20,000

Materials placed into production, December 27,500
Direct labor, December 37,500

Factory overhead rate is 150 percent of direct labor costs.

Job cost sheets had the following balances:

Job Z1 $32,500
Job Z2 55,000
Job Z3 35,000
Job Z4 18,750
Jobs Z3 and Z4 were not completed at the end of December.

Refer to Figure 5-5. What is the cost of goods finished during December for Wright Corporation?
A. $85,000
B. $87,500
C. $56,250
D. $53,750

69. Figure 5 - 6

In the Mains Company, the following Job cards were totaled at the end of the month:
Job 243 $5,750
Job 244 $4,980
Job 245 $3,675
Job 246 $4,250
Job 247 $5,100
Job 248 $3,800

Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in
Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of
the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to
finished goods.

Refer to Figure 5-6. What is the cost of goods sold for the month?

A. $10,730
B. $10,850
C. $12,575
D. none of these
70. Figure 5 - 6

In the Mains Company, the following Job cards were totaled at the end of the month:
Job 243 $5,750
Job 244 $4,980
Job 245 $3,675
Job 246 $4,250
Job 247 $5,100
Job 248 $3,800

Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in
Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of
the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to
finished goods.

Refer to Figure 5-6. What is the ending work-in-process inventory for the month?

A. $10,730
B. $4,250
C. $12,575
D. none of these

71. Figure 5 - 6

In the Mains Company, the following Job cards were totaled at the end of the month:
Job 243 $5,750
Job 244 $4,980
Job 245 $3,675
Job 246 $4,250
Job 247 $5,100
Job 248 $3,800

Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in
Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of
the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to
finished goods.

Refer to Figure 5-6. What is the cost of goods manufactured for the month?

A. $10,730
B. $10,850
C. $12,575
D. none of these
72. Russell Company has the following data pertaining to 2011:

Beginning materials inventory $ 50,000

Beginning work-in-process inventory -0-
Beginning finished goods inventory -0-
Materials placed into production 125,000
Materials purchased on account 137,500
Direct labor incurred (10,000 hours) 62,500
Cost of goods completed (Job BB8) 25,000

Factory overhead rate is 125 percent of direct labor costs.

What is the ending materials inventory balance for Russell in 2011?

A. $50,000
B. $62,500
C. $12,500
D. $37,500

73. Smith Company has the following selected debit balance accounts at the end of the current year: Work-in-
Process, $25,000; Finished Goods, $12,500; Cost of Goods Sold, $37,500; and Factory Overhead, $6,000. The
pro-rated amount charged to Cost of Goods Sold for factory overhead will be
A. $25,000.
B. $3,000.
C. $37,500.
D. $6,000.

74. Under normal costing, which of the following statements is true regarding factory overhead?
A. The balance in factory overhead at the end of the accounting period is closed.
B. Different overhead rates are used for different quantities of predicted activity.
C. The balance in factory overhead at the end of the accounting period is kept open.
D. The immaterial balance in factory overhead at the end of the accounting period is allocated to the cost of
goods sold and inventory accounts.

75. Total manufacturing-related costs incurred for Miller Company in October for all jobs is as follows:

Direct materials $ 900

Insurance-factory building 150
Direct labor 1,200
Property taxes-factory building 400
Other factory overhead costs 1,450
Factory overhead applied 1,650
Assuming Miller uses a normal costing system and applies overhead based on a predetermined rate, what is the credit to Overhead Control to close
the account at the end of the year?
A. $900
B. $350
C. $1,450
D. $1,650

76. Which of the following transactions in a job-order costing system requires the procedure of merely moving
a job-order cost sheet from one file to another?
A. applying factory overhead to jobs
B. closing overapplied factory overhead
C. delivering a completed job to a customer
D. moving the job from one production department to another

77. Figure 5-7

The following information is available pertaining to the Production Division:

Mixing Dept. Finishing Dept. Total

Overhead costs $7,500 $22,500 $30,000
Direct labor hours 7,500 2,500 10,000
Machine hours 2,500 7,500 10,000

Production information pertaining to Job 4X5:

Mixing Dept. Finishing Dept. Total

Prime costs $1,250 $-0- $1,250
Direct labor hours 250 -0- 250
Machine hours 1 -0- 1
Units produced 500 -0- 500

Refer to Figure 5-7. What is the plantwide overhead rate based on direct labor hours?
A. $3.00
B. $1.50
C. $9.00
D. $1.00
78. Figure 5-7

The following information is available pertaining to the Production Division:

Mixing Dept. Finishing Dept. Total

Overhead costs $7,500 $22,500 $30,000
Direct labor hours 7,500 2,500 10,000
Machine hours 2,500 7,500 10,000

Production information pertaining to Job 4X5:

Mixing Dept. Finishing Dept. Total

Prime costs $1,250 $-0- $1,250
Direct labor hours 250 -0- 250
Machine hours 1 -0- 1
Units produced 500 -0- 500

Refer to Figure 5-7. Using the plantwide overhead rate based on direct labor hours what is the cost of Job 4X5?
A. $1,250
B. $2,000
C. $8,750
D. $31,250

79. Figure 5-7

The following information is available pertaining to the Production Division:

Mixing Dept. Finishing Dept. Total

Overhead costs $7,500 $22,500 $30,000
Direct labor hours 7,500 2,500 10,000
Machine hours 2,500 7,500 10,000

Production information pertaining to Job 4X5:

Mixing Dept. Finishing Dept. Total

Prime costs $1,250 $-0- $1,250
Direct labor hours 250 -0- 250
Machine hours 1 -0- 1
Units produced 500 -0- 500

Refer to Figure 5-7. What is the overhead rate for the Finishing Department based on machine hours?
A. $9.00
B. $3.00
C. $2.25
D. $1.00
80. Figure 5-7

The following information is available pertaining to the Production Division:

Mixing Dept. Finishing Dept. Total

Overhead costs $7,500 $22,500 $30,000
Direct labor hours 7,500 2,500 10,000
Machine hours 2,500 7,500 10,000

Production information pertaining to Job 4X5:

Mixing Dept. Finishing Dept. Total

Prime costs $1,250 $-0- $1,250
Direct labor hours 250 -0- 250
Machine hours 1 -0- 1
Units produced 500 -0- 500

Refer to Figure 5-7. Based on departmental overhead rates, what is the cost of Job 4X5? Departmental overhead notes for the Mixing Department are
based on direct labor hours, while departmental overhead rates for the Finishing Department are based on machine hours.
A. $31,250
B. $8,750
C. $2,000
D. $1,250

81. Figure 5-7

The following information is available pertaining to the Production Division:

Mixing Dept. Finishing Dept. Total

Overhead costs $7,500 $22,500 $30,000
Direct labor hours 7,500 2,500 10,000
Machine hours 2,500 7,500 10,000

Production information pertaining to Job 4X5:

Mixing Dept. Finishing Dept. Total

Prime costs $1,250 $-0- $1,250
Direct labor hours 250 -0- 250
Machine hours 1 -0- 1
Units produced 500 -0- 500

Refer to Figure 5-7. What are the total overhead costs assigned to Job 4X5, assuming the Mixing and Finishing Departments use direct labor hours
and machine hours for their bases, respectively?
A. $62.50
B. $1,500.00
C. $750.00
D. $250.00
82. The cost of spoilage is added to a job when it is considered to be
A. a result of the process, no matter what job is being worked on.
B. a normal consequence of working on that job.
C. abnormal.
D. all of these.

83. In a job-order costing system, if costs are incurred to rework a job due to inadequate training of personnel,
these costs would be
A. debited to manufacturing overhead control.
B. debited to the job.
C. credited to manufacturing overhead control.
D. credited to the cost of goods sold.

84. Figure 5 - 8

Griswold Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs.
The following overhead activities were budgeted for the year.

Activity Cost Driver Amount of driver

setups $ 240,000 number of setups 6,000
purchasing 160,000 number of parts 20,000
other overhead 300,000 direct labor hours 80,000

The following information about the jobs was given for September.

Job 101 Job 102 Job 103 Job 104

Balance 9/1 $64,900 $40,770 $30,500 0
direct materials 54,000 37,900 25,000 11,000
direct labor 80,000 38,500 43,000 21,000
number of setups 40 10 30 200
number of parts 300 80 400 500
direct labor hours 5,000 2,400 5,200 1,200

By September 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. What is the activity rate for purchasing?

A. $ 1.25
B. $ 3.75
C. $ 8
D. $ 40
85. Figure 5 - 8

Griswold Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs.
The following overhead activities were budgeted for the year.

Activity Cost Driver Amount of driver

setups $ 240,000 number of setups 6,000
purchasing 160,000 number of parts 20,000
other overhead 300,000 direct labor hours 80,000

The following information about the jobs was given for September.

Job 101 Job 102 Job 103 Job 104

Balance 9/1 $64,900 $40,770 $30,500 0
direct materials 54,000 37,900 25,000 11,000
direct labor 80,000 38,500 43,000 21,000
number of setups 40 10 30 200
number of parts 300 80 400 500
direct labor hours 5,000 2,400 5,200 1,200

By September 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. What is the cost of job 102?

A. $ 86,440
B. $ 127,210
C. $ 117,170
D. none of these

86. Figure 5 - 8

Griswold Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs.
The following overhead activities were budgeted for the year.

Activity Cost Driver Amount of driver

setups $ 240,000 number of setups 6,000
purchasing 160,000 number of parts 20,000
other overhead 300,000 direct labor hours 80,000

The following information about the jobs was given for September.

Job 101 Job 102 Job 103 Job 104

Balance 9/1 $64,900 $40,770 $30,500 0
direct materials 54,000 37,900 25,000 11,000
direct labor 80,000 38,500 43,000 21,000
number of setups 40 10 30 200
number of parts 300 80 400 500
direct labor hours 5,000 2,400 5,200 1,200
By September 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. What is the cost of goods manufactured?

A. $ 144,400
B. $ 215,670
C. $ 178,340
D. $ 249,610

87. Figure 5 - 8

Griswold Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs.
The following overhead activities were budgeted for the year.

Activity Cost Driver Amount of driver

setups $ 240,000 number of setups 6,000
purchasing 160,000 number of parts 20,000
other overhead 300,000 direct labor hours 80,000

The following information about the jobs was given for September.

Job 101 Job 102 Job 103 Job 104

Balance 9/1 $64,900 $40,770 $30,500 0
direct materials 54,000 37,900 25,000 11,000
direct labor 80,000 38,500 43,000 21,000
number of setups 40 10 30 200
number of parts 300 80 400 500
direct labor hours 5,000 2,400 5,200 1,200

By September 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. The ending work in process would consist of the costs of what jobs?
A. Job 102 + Job 103
B. Job 101 + Job 104
C. Job 101 + Job 102 + Job 103 + Job 104
D. Job 101 + Job 102 + Job 103

88. Figure 5 - 8

Griswold Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs.
The following overhead activities were budgeted for the year.

Activity Cost Driver Amount of driver

setups $ 240,000 number of setups 6,000
purchasing 160,000 number of parts 20,000
other overhead 300,000 direct labor hours 80,000
The following information about the jobs was given for September.

Job 101 Job 102 Job 103 Job 104

Balance 9/1 $64,900 $40,770 $30,500 0
direct materials 54,000 37,900 25,000 11,000
direct labor 80,000 38,500 43,000 21,000
number of setups 40 10 30 200
number of parts 300 80 400 500
direct labor hours 5,000 2,400 5,200 1,200

By September 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.

Refer to Figure 5-8. The cost of goods sold would consist of the costs of what jobs?
A. Job 102 + Job 103
B. Job 101 + Job 104
C. Job 101 + Job 102 + Job 103 + Job 104
D. Job 101 + Job 102 + Job 103

89. Figure 5-9

Alpha Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It
requires the following:
direct materials $3,000
direct labor ($10/hr) 1,000
overhead (150% DL$) 1,500
After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the spoilage was considered normal, what is the cost of job 492?
A. $5,640
B. $5,760
C. $5,500
D. $3,000
90. Figure 5-9

Alpha Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It
requires the following:
direct materials $3,000
direct labor ($10/hr) 1,000
overhead (150% DL$) 1,500
After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the rework is considered normal spoilage, what is the journal entry for overhead
control?
A. overhead control $ 140
materials $60
payroll $80
B. materials $ 60
payroll $80
overhead control $140
C. no journal entry is needed
D. none of these

91. Figure 5-9

Alpha Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It
requires the following:
direct materials $3,000
direct labor ($10/hr) 1,000
overhead (150% DL$) 1,500
After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the rework is considered abnormal spoilage, what is the journal entry for overhead
control?
A. overhead control $ 140
materials $60
payroll $80
B. materials $ 60
payroll $80
overhead control $140
C. no journal entry is needed
D. none of these
92. Figure 5-9

Alpha Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It
requires the following:
direct materials $3,000
direct labor ($10/hr) 1,000
overhead (150% DL$) 1,500
After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.

Refer to Figure 5-9. If the rework is considered abnormal spoilage, what is the cost of job 492?
A. $5,500
B. $6,740
C. $3,140
D. $5,640

93. Compare and contrast perishability and intangibility in an automobile oil lubrication shop and architectural
design firms.

Intangibility refers to the nonphysical nature of services. There can be no inventory of services. Both lube jobs
and architectural designs must be performed upon the demand of the customer to meet the specifications-of the
car, land, etc. Perishability also means that services cannot be inventoried because they are consumed when
they are performed. The consumption of service means that customers may need repeated treatments. Oil lubes
are much more perishable than architectural designs. There is a more frequent need for lube jobs than design
jobs.

94. What is the most important factor that causes service firms to generally rank lower in customer satisfaction
than manufacturing firms?

Employees are key to customer services. Service firms have a greater heterogeneity of labor due to different
skills and abilities for interacting with customers and each other. Employees may not even behave the same
from one day to another, creating inconsistency in the level of service. In manufacturing, employees are
interacting with machinery in more routine tasks. Performance is more consistent.
95. Explain why actual costing systems are rarely used in practice.

Actual costing systems are rarely used in practice because they do not provide accurate unit cost information on
a timely basis. Actual per-unit overhead costs can vary dramatically from period to period because (1) actual
costs vary from period to period and/or (2) the number of units produced may vary from period to period. Thus,
when actual costing is used, a unit produced during a low-volume month may be assigned a higher cost than a
unit produced during a high-volume month, even though the units are identical.

To avoid fluctuations in per-unit costs using actual overhead costs, it is necessary to wait until the end of the
period and use total actual overhead costs for the year to calculate per-unit amounts. However, that information
is received too late to be used throughout the year for planning, control, and decision making. Using a normal
costing system and a predetermined overhead rate avoids the problems associated with an actual cost system.

96. Why are firms reluctant to use actual costing? How does normal costing solve the problems?

Actual costing systems do not provide accurate unit cost information on a timely basis because manufacturing
overhead costs are indirect costs that may fluctuate dramatically from month to month and may be incurred
independent of nonuniform production levels. Normal costing averages overhead over the entire year and
applies it as production takes place.

97. Why are unit costs important? Why do full-cost unit costs change from accounting period to accounting
period.

Unit costs are important for valuing inventory, calculating the CGS and net income, and for making decisions.
Full-cost unit costs consist of direct materials, direct labor and manufacturing overhead. If there are changes in
production volume, the fixed manufacturing overhead will be spread over different numbers of units causing
unit costs to change.

98. What are the source documents used in a job-order costing system? How do the source documents relate to
the job cost sheet? How do these documents inform work in process?

The materials requisition form and job time tickets are the source documents for materials and labor. The
materials requisition form is used to bring materials needed for production to the production floor for different
jobs. The job time ticket is kept for each laborer. It reports the time spent working on different jobs. These
source documents are used to assign materials and labor costs to job cost sheets. The job cost sheet collects all
the materials, labor, and overhead applied to each job. The job cards are read and summarized to create the WIP
account.
99. Jocarro Company has a job costing system. The following items appeared in the Work-in-Process account
during February 2011:

February 1, 2011, balance $20,000

Materials placed into production ?
Direct labor (4,000 hours) $120,000
Factory overhead applied $96,000
Cost of goods manufactured $400,000
February 28, 2011, balance $16,000

Jocarro applies overhead to production on the basis of direct labor hours. Job XX, the only job in process on February 28, has been charged $10,600
materials cost and has 100 labor hours of direct labor time assigned to it.

Required:

a. Determine the predetermined factory overhead rate for Jocarro Company.

b. Determine the amounts of materials, direct labor, and factory overhead included in the
February 28, 2011, work in process.

c. Determine the amount of materials placed into production during February 2011.

a. Factory overhead rate = $96,000/4,000 = $24 per direct labor hour

b. Costs assigned to Job XX:

materials $10,600
direct labor (100 x $30*) 3,000
factory overhead applied (100 x $24) 2,400
work in process, February 28,2006 $16,000

* $120,000/4000 = $30 per hour

c. $X + $120,000 +$96,000 + $20,000 - $16,000 = $400,000

X = $180,000
100. Reed Incorporated uses a job-order costing system and a predetermined overhead rate based on machine
hours.

At the beginning of the year, the company estimated manufacturing overhead for the year would be $240,000
and machine hours would be 8,000.

The following information pertains to December of the current year:

Job 10 Job 11 Job 12 Total

Work-in-process, Dec. 1 $16,000 $26,000 $38,000 $80,000

December production activity:

Materials requisitioned $4,000 $4,800 $7,200 $16,000
Direct labor cost $2,400 $3,600 $4,000 $10,000
Machine hours 400 700 900 2,000
Labor hours 120 180 200 500

Actual manufacturing overhead cost incurred in December was $61,000.

Required:

a. Compute the predetermined overhead application rate.

b. Determine the total cost associated with each job.

c. If jobs 10 and 12 were completed, prepared the journal entry to move the cost.

d. If job 10 was delivered to customers that paid $50,000 cash, prepare the journal
entries.
What is the gross profit for job 10?

e. Assuming no beginning work in process, what is the cost assigned to ending work in
process?

f. Assuming no beginning finished goods what is the cost assigned to ending finished goods?

g. How much was overhead over/underapplied?

a. $240,000/8,000 = $30

b. Job 10 Job 11 Job 12 Total

Work in process, Dec. 1 $16,000 $26,000 $38,000 $80,000
Materials requisitioned $ 4,000 $ 4,800 $ 7,200 $16,000
Direct labor cost $ 2,400 $ 3,600 $ 4,000 $10,000
Overhead applied:
Machine hours
400 x $30 $12,000
700 x $30 $21,000
900 x $30 $27,000
total 34,400 55,400 76,200

c. Finished goods $110,600

Work in process $110,600

job 10 + job 12 = 34,400 + 76,200 = $110,600 (the cost of goods manufactured)

d. record a sale

Cash $50,000
Sales $50,000

Cost of goods sold $34,400

Finished goods $34,400

Sales $50,000
CGS 34,400
Gross Profit $15,600

e. Job 11 is still in production = $55,400

f. Finished goods has 1 job - job 12 = $76,200

g. Actual overhead $ 61,000

Applied overhead (12,000 + 21,000 + 27,000)=$ 60,000
Underapplied overhead $ 1,000

101. Wolf Company had the following selected account balances at the end of 2011:

Work in Process $120,000

Finished Goods 150,000
Cost of Goods Sold 180,000
Factory Overhead (overapplied) 63,000
Required:

a. Prepare the journal entry to dispose of the factory overhead balance assuming it is written off to Cost of Goods Sold.
b. Prepare the journal entry to dispose of the factory overhead balance assuming it is allocated among Work in Process, Finished Goods, and
Cost of Goods Sold based on ending balances.
c. Which method of disposing of under- or overapplied factory overhead cost is more accurate? Explain.

a. Factory Overhead 63,000

Cost of Goods Sold 63,000

b. Factory Overhead 63,000

Work in Process (120/450) 16,800
Finished Goods (150/450) 21,000
Cost of Goods Sold (180/450) 25,200

c. When the amount of overapplied or underapplied overhead is immaterial, writing it off to

Cost of Goods Sold is sufficient. If the amount is material, allocating the amount to the
two inventories (WIP and FG) and Cost of Goods Sold is preferable.

102. Selected account balances of Howard Company for 2011 are as follows:

Work in Process $35,000 Debit

Finished Goods $65,000 Debit
Cost of Goods Sold $100,000 Debit
Factory Overhead $22,000 Debit

Required:

a. Were factory overhead costs underapplied or overapplied in 2011? Explain.

b. Prepare the journal entry to dispose of the factory overhead balance assuming the amount is immaterial.
c. Prepare the journal entry to dispose of the factory overhead balance using the allocation method.

a. Underapplied by $22,000
The actual costs were $22,000 greater than those applied to work-in-process.

b. Cost of Goods Sold 22,000

Factory Overhead 22,000

c. Work in Process (35,000/200,000) 3,850

Finished Goods (65,000/200,000) 7,150
Cost of Goods Sold (100,000/200,000) 11,000
Factory Overhead 22,000

103. The following information was taken from the job cost sheet for Job 101 for Scott Manufacturing
Company:

Date started: July 5, 2011

Date completed: August 21, 2011
 Direct Direct Factory Job
Date Materials Labor Overhead Total
7-05-09 $3,000
7-15-09 $ 900 $450
7-17-09 1,500
7-22-09 1,350 675
8-01-09 1,500
8-21-09 600 300

Job 101 was sold on account on August 25, 2011, for 160 percent of its cost.

Required:

a. Prepare the journal entries to record the costs incurred for Job 101 in 2011 for direct materials, direct labor, and factory overhead.
b. Prepare the journal entry to record the completion of Job 101.
c. What is the predetermined factory overhead rate for Scott?
d. Prepare the journal entries to record the sale of Job 101.

a. Work-in-Process 6,000
Materials 6,000

Work-in-Process 2,850
Wages Payable 2,850

Work-in-Process 1,425
Factory Overhead 1,425

b. Finished Goods 10,275

Work-in-Process 10,275

c. $1,425/$2,850 = 50% of direct labor costs

d. Accounts Receivable 16,440

Sales 16,440

Cost of Goods Sold 10,275

Finished Goods 10,275

104. Moore Company completed the following transactions with respect to its manufacturing operations during
December 2011:

a. Materials costing $140,000 and indirect materials costing $16,800 were purchased on account. Assume indirect materials was debited to
materials.
b. A total of $70,000 of materials was requisitioned to the factory for manufacturing operations conducted during December.
c. Manufacturing payroll for the month consisted of 2,000 hours of direct labor and 500 hours of indirect labor, both at $14 per hour.
d. Indirect materials costing $7,000 were requisitioned.
e. Depreciation on the factory building and equipment was $14,000.
f. Miscellaneous factory overhead expenses totaled $5,600 for December.
g. Factory overhead cost was applied to work in process at the rate of 125 percent of direct labor costs.
h. Units of product with a total manufacturing cost of $84,000 were completed and transferred to the finished goods warehouse.
i. Finished goods costing $49,000 were sold during December for $77,000.
Required:

Prepare journal entries for each of the transactions that occurred during December 2011.

a. Materials 156,800
Accounts Payable 156,800

b. Work-in-Process 70,000
Materials 70,000

c. Work-in-Process 28,000
Factory Overhead 7,000
Wages Payable 35,000

d. Factory Overhead 7,000

Materials 7,000

e. Factory Overhead 14,000

Accumulated Depreciation 14,000

f. Factory Overhead 5,600

Various Accounts 5,600

g. Work-in-Process 35,000
Factory Overhead 35,000

h. Finished Goods 84,000

Work-in-Process 84,000

i. Cash 77,000
Sales 77,000

Cost of Goods Sold 49,000

Finished Goods Inventory 49,000
105. Dobro Company has two production departments: A and B. Dobro has following budgeted overhead costs
and activity:

Overhead costs Direct labor hours Machine hours

Department A $ 50,000 10,000 5,000
Department B 175,000 5,000 25,000
Total $250,000 15,000 30,000

Production data for job 20 and 21 are given below:

Job 20 Job 21
Dept A Dept B Dept A Dept B
Prime costs $7,000 $12,000 $22,000 $30,000
Direct labor hours 50 5 60 5
Machine hours 10 40 10 50

Job 20 Job 21
Units produced 100 100

Required:

a. Compare the costs per unit of Job 20 if Dobro uses

1. a plantwide rate based on direct labor hours;
2. a plantwide rate based on machine hours;
3. departmental rates with Department A based on direct
labor hours and Department B using machine hours.
(round to 2 decimal places)
b. Why is there such a variation in the cost per unit? Which method provides the best
cost assignment?

a. Overhead rates if Dobro uses

1. a plantwide rate based on direct labor hours;
$250,000/15,000 = $16.67 DLH
2. a plantwide rate based on machine hours;
$250,000/30,000 = $8.33 MH
3. departmental rates with department A based on direct
labor hours and department B using machine hours.
A $50,000/10,000 = $5 DLH
B $175,000/5,000 = $35 MH
106. Highland Corporation is a job order costing company that uses activity-based costing to apply overhead to
jobs. The following overhead activities were budgeted for the year.

Activity Cost Driver Amount of driver

setups $ 120,000 number of setups 6,000
purchasing 80,000 number of parts 20,000
other overhead 150,000 direct labor hours 75,000

The following information about the jobs was given for October.

Job 1001 Job 1002 Job 1003 Job 1004

Balance 10/1 $44,900 $60,700 $30,500 0
direct materials 54,000 37,000 25,000 41,000
direct labor 80,000 38,500 43,000 71,000
number of setups 40 10 30 200
number of parts 300 180 400 500
direct labor hours 5,000 2,400 5,200 1,200

By October 31, Jobs 1001 and 1003 were completed and sold. The remaining jobs were still in process.

Required:
1. Calculate the activity rates for each overhead activity.
2. Calculate the cost of each job for October 31.
3. What is the beginning work in process on October 1 and November 1?
4. What is the cost of goods manufactured?
5. What is the cost of goods sold?
6. Draw the T account for work in process. (include all debits and credits) Prepare the Statement of the Cost of Goods Manufactured.

WIP
___________________________________________
BI |
DM |
DL |
MOH |
_________________ |__________________________
EI

1.

Activity Cost amount of Driver activity rate

setups $ 120,000 6,000 $ 20
purchasing 80,000 20,000 $ 4
other overhead 150,000 75,000 $ 2

2.
Job 1001 Job 1002 Job 1003 Job 1004 Total
Balance 10/1 $44,900 $60,700 $30,500 0 136,100
dm 54,000 37,000 25,000 41,000 157,000
dl 80,000 38,500 43,000 71,000 232,000
# setups $20 ( 40) 800 (10) 200 (30) 600 (200) 4,000 5,600
# parts $4 (300) 1,200 (180) 720 (400) 1,600 (500) 2,000 5,520
dlhours $2 (5,000) 10,000 (2,400) 4,800 (5,200) 10,400 (1,200) 2,400 27,600
TOTAL $190,900 $141,920 $111,100 $120,400 $564,320
3. BWIP = $136,100
EWIP 10/31 = BWIP 11/1 = jobs 1002 + 1004 = $141,920 + $120,400 = $262,320

4. CGM = jobs 1001 + 1003 = $190,900 + $111,100 = $302,000

5. CGS = jobs 1001 + 1003 = $190,900 + $111,100 = $302,000

6. WIP
___________________________________________
BI 136,100 | 302,000
DM 157,000 |
DL 232,500 |
MOH 38,720 |
_________________ |__________________________
EI 262,320

STATEMENT OF COST OF GOODS MANUFACTURED

Highland Corporation
Month of October

Direct materials used in production $157,000

Direct labor 232,500
Manufacturing overhead applied 38,720
Total manufacturing costs added 428,220
Add: beginning work in process 136,100
Less: ending work in process 262,320
Cost of Goods manufactured 302,000