ACCT 102 Management Accounting
Practice Questions – Job‐order Costing
1. Which industry is most unlikely to use a job-order costing system?
A. construction
B. aircraft
C. printing of textbooks
D. production of beer
E. software development
Answer: [___________________]
Use the following information for question 2 to 5
Jia Jia Company has 2 departments. Manufacturing overhead costs are applied based on direct
labour cost in Department (Dept) A and machine hours in Department (Dept) B. The
following information is available for the month of October 2012.
Budget
Direct labour costs
Machine hours
Manufacturing overhead costs
Actual
Job#8
Direct materials costs
Direct labour costs
Machine hours
Job#9
Beginning Work in Process
Direct materials costs
Direct labour costs
Machine hours
Job #10
Direct materials costs
Direct labour costs
Machine hours
Dept. A
$180,000
51,000
$225,000
Dept. B
$165,000
40,000
$180,000
Units
Dept. A
Dept. B
100
$10,000
$11,000
5,000
$13,000
$14,000
3,000
$5,000
$9,000
$13,000
2,000
$4,000
$11,000
$16,000
4,000
$9,000
$8,000
8,000
$9,000
$12,000
5,000
120
50
Due to a lack of materials, Job#9 remains incomplete at the end of October 2012. Only Job#8
and Job #10 were completed. There were no other jobs in October 2012.
2. Compute the budgeted Manufacturing Overhead rate for Department A and Department B.
Answer: Manufacturing Overhead Rate for Dept A [ _________ % of direct labour
cost]
Manufacturing Overhead Rate for Dept B [$____________per machine hour]
Department A: $225,000/$180,000 = 125% of direct labour cost
Department B: $180,000/40,000 = $4.50 per machine hour
3. If the actual manufacturing overhead cost incurred by both departments added together
was $100,000 in total, was the manufacturing overhead over or under applied and by how
much?
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ACCT 102 Management Accounting
Practice Questions – Job‐order Costing
Answer: [$___________________]
Under-applied/Over applied
(Circle your answer)
Job#8: ($11,000 x 125%) + ($4.50 x 3,000) = $27,250
Job#9: ($13,000 x 125%) + ($4.50 x 4,000) = $34,250
Job#10: ($8,000 x 125%) + ($4.50 x 5,000) = $32,500
Total applied overhead = $94,000
Under-applied = $100,000 - $94,000 = $6,000
4. What was the work in process in ($) as at the end of the month? Assume that over and
under applied overheads are all written off to cost of goods sold.
Answer: Work in Process [$___________________]
Job#9: $5,000 +$4,000 + $9,000 + $11,000 + $13,000 + $16,000 + $34,250 = $92,250
5. The client for Job #10 required an urgent delivery of 10 units before the end of October.
None of the products for Job #8 was delivered before the end of October. What was the
total finished goods inventory in ($) as at the end of the month?
Answer: Finished Goods [$__________________]
Job#10: $9,000 +$8,000 + $9,000 + $12,000 + $32,500 = $70,500
40/50 or 80% not delivered, FG of Job#10 = $70,500 * 80% = $56,400
Job#8: $10,000 + $13,000 + $11,000 + $14,000 + $27,250 = $75,250
Finished Goods = $56,400 + $75,250 = $131,650.
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ACCT 102 Management Accounting
Practice Questions – Job‐order Costing
Use the following information to answer Q6 to Q9.
Manchester Co. uses a job-order costing system. Manufacturing overhead is applied to the
jobs using normal costing on the basis of direct labour costs ($). Actual total manufacturing
overhead incurred during the year was $119,000.
The following was recorded in the Work in Process account for the year:
Balance, Jan 1
Direct materials
Direct labour
Manufacturing
overhead
Work in Process of all the jobs
$ 50,000 Completed projects
230,000 during the year
75,000
$390,000
120,000
6. Compute the predetermined overhead rate that was in use during the year.
Answer: [__________________]
Applied OH $30,000POR x DL$
$120,000 = POR x $75,000
POR = $1.60/DL$
7. At the end of the year, only one job, Project M, was still in process. Project M has been
charged with $10,000 in direct labour costs. Complete the following Job Cost sheet for
Project M:
Job Cost sheet for Project M
Direct materials
?
Direct labour
?
Manufacturing overhead
?
Balance as at 31 Dec
?
WIP, 31 Dec = balance of Project M (Sum of Debit entries – sum of credit entries) =
50,000 + 230,000 + 75,000 + 120,000 – 390,000 = $85,000
Direct materials
Direct labour
Manufacturing overhead
= Balance as at 31 Dec
$59,000 (balancing figure)
$10,000 (given)
$16,000 (1.6 x $10,000)
$85,000 (from above)
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ACCT 102 Management Accounting
Practice Questions – Job‐order Costing
8. Value of finished goods at the beginning of the year was $100,000 and at the end of the
year was $5,000. If Manchester Co. closes underapplied or overapplied overhead cost to
the cost of goods sold, calculate the adjusted cost of goods sold.
Answer: [__________________]
Overapplied overhead
= Actual OH – Applied OH
= $119,000 - $120,000
= $1,000
COGS before adjustment = BGF + COGM – EFG
= $100,000 + $390,000 - $5,000
= $485,000
Less Overapplied OH $1,000
Adjusted COGS
= $484,000
9. Give one reason to explain why you agree or disagree with Manchester Co.’s policy to
close the underapplied or overapplied overhead costs to cost of goods sold.
Answer:
Agree. The overapplied overhead is insignificant and the impact of the write-off to
COGS is immaterial.
or
Disagree. It is more accurate to split the amount of overapplied into COGS, WIP and FG.
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Job-order Costing – Challenging Questions
INFORMATION FOR QUESTIONS 1 THROUGH 3
The Leininger Company uses a normal job order costing system. The operating data for
October 2009 are summarized below in which wage rate was $25 per hour and factory
overhead was applied at the rate of $15 per direct labor hour.
Beginning Inventories:
Materials (both direct and indirect)
Work in Process (Job #101)
Finished Goods (Job #100)
$27,000
18,000
14,000
Materials Purchased
$30,000
Materials Requisitioned for Production:
Direct Materials:
Job #101
Job #102
Job #103
Indirect Materials
Factory Labor Costs:
Direct Labor:
$59,000
Job #101
Job #102
Job #103
$ 7,000
9,000
10,000
$ 8,000
12,000
4,000
Indirect Labor
Other Operating Costs Incurred:
Other manufacturing overhead
Selling and Administrative Expenses
$ 1,400
13,000
$26,000
$12,000
$24,000
$ 9,000
$14,400
Jobs #101 and #102 were completed during October. Jobs #100 and #102 were sold.
Question 1.
The Ending WIP amounts to:
Answer: [__$ 16,400______]
Question 2.
The product cost of Job #101 amounts to:
Answer: [__$ 37,800______]
Question 3.
After closing over- or under-applied MOH against the Cost of Goods Sold (COGS), the
adjusted COGS during October 2009 is:
Answer: [__$ 50,200_____]
1
Job-order Costing – Challenging Questions
Question 4
DEF Mfg Ltd allocates manufacturing overheads using a simple POR system with direct
labour hours as the driver. The company has budgeted total annual manufacturing overheads
of $1,080,000 for 2010. Average monthly utilization of direct labour is projected to be 2,000
hours at an average cost of $20 per hour.
The following table contains relevant cost data of DEF Mfg Ltd in relation to its operations in
the month of March 2010.
Account Bal as at: 1st March
Materials Added in March
Dir Labour used in March
Job # 201
$21,000
$6,000
$4,000
Job # 202
$17,000
$9,000
$8,000
Job # 203
Job # 204
$15,000
$14,000
$11,000
$12,000
All jobs except Job # 203 were completed by 31st March. Job # 201 and #204 were also
delivered to their respectively “buyer” before the end of March.
Actual manufacturing overheads for March amounted to $89,600.
The company always writes off all over- or under- applied OH directly to Cost of Goods Sold.
Compute the following for the month of March:
(i)
(ii)
(iii)
Ending WIP
Ending Finished Goods
Cost of Goods Sold (after adjusting for over or under applied OH)
ANSWER
(i)
Ending WIP
$ 60,500
(ii)
Ending Finished Goods
$ 52,000
(iii)
Cost of Goods Sold
$ 94,100
2
Job-order Costing – Challenging Questions
Question 5
Monotone MA Company uses a job cost system for its jobs. In addition to the two direct
cost categories (direct materials and direct labour), the company applies manufacturing
overhead costs on the basis of machine hours (MH) worked. For the month of September,
2010, the following information is extracted from its accounting records:
a. Beginning Inventory @ 01.09.2010
Direct materials:
Finished goods: Job #A110
Work-in-process (WIP) – Job # A111:
– Job # B112:
$ 50,000
$ 80,000
$180,000
$125,000
b. Total direct materials issued to the various jobs during September are as follows:
$ 50,000
Job# A111:
Job# B112:
$ 30,000
Job# B114:
$ 80,000
TOTAL
$160,000
c. Total direct labour costs for the month amounted to $54,000, all production workers
are paid the same rate, the direct labour hours (DLH) worked for each job during the
month are as follows:
Job# A111:
400 DLH
Job# B112:
600 DLH
Job# B114:
800 DLH
TOTAL
1,800 DLH
d. Manufacturing overhead is allocated using a predetermined overhead rate (POHR).
The estimated overhead for September was $20,000.
e. The actual machine hours utilized in September matched with the budgeted machine
hours.
Job# A111:
400 MH
Job# B112:
600 MH
Job# B114:
1,000 MH
TOTAL
2,000 MH
f. Ending inventory @ 30.09.2010
Direct materials:
$60,000
Only Job# B114 remained unfinished on 30.09.2011. All completed jobs have been
delivered to customers in September.
g. Total “Actual Manufacturing Overhead” amounted to $19,500 as shown below:
Job# A111:
$ 3,800
Job# B112:
$ 5,500
Job# B114:
$10,200
$19,500
What is the total cost to-date for Job# B114, if overhead application adjustment is written
off directly to Cost of Goods Sold?
Answer: [__$114,000______]
3
Job-order Costing – Challenging Questions
Question 1.
The Ending WIP amounts to:
Answer: [__$ 16,400______]
Workings:
Job 103:
Applied Overhead:
Direct Labour Hours = 4,000/25 = 160 hrs
Applied overhead = 160 hrs x $15 per hour = $2,400
Direct Material
Direct Labour
Overhead applied
10,000
4,000
2,400
16,400
Question 2.
The product cost of Job #101 amounts to:
Answer: [__$ 37,800______]
Workings:
Job 101:
Applied Overhead:
Direct Labour Hours = 8,000/25 = 320 hrs
Applied overhead = 320 hrs x $15 per hour = $4,800
BWIP
Direct Material
Direct Labour
Overhead applied
18,000
7,000
8,000
4,800
37,800
Question 3.
After closing over- or under-applied MOH against the Cost of Goods Sold (COGS), the
adjusted COGS during October 2009 is:
Answer: [__$ 50,200_____]
Workings:
COGS
Job 100
Job 102
$
Direct Material
Direct Labour
Overhead applied
$
14,000
9,000
12,000
7,200
W1
28,200
Under-applied overhead adj
Adjusted COGS
8,000
50,200
W2
4
Job-order Costing – Challenging Questions
Workings
W1: Job 102 Applied Overhead:
Direct Labour Hours = 12,000/25 = 480 hrs
Applied overhead = 480 hrs x $15 per hour = $7,200
W2: Overhead adjustment:
Actual Manufacturing Overhead Incurred:
Indirect Materials
Indirect Labour
Other Manufacturing O/H
$
12,000
9,000
1,400
22,400
Applied Overhead:
Job 101
Job 102
Job 103
Or
Direct Labour
Wage rate per hour
Total labour hour
Overhead absorption rate
Applied Overhead
$
4,800
7,200
2,400
14,400
$24,000
÷
$25
960 hrs
x $15 per hr
$14,400
Underapplied overhead =$ 22,400 – 14,400 = $ 8,000
OR
FOH Incurred = 22,400
FOH Applied = 14,400
Adjusted COGS = 14,000+28,200+8,000 = 50,200
5
Job-order Costing – Challenging Questions
Question 4
ANSWER
(i)
Ending WIP
$ 60,500
(ii)
Ending Finished Goods
$ 52,000
(iii)
Cost of Goods Sold
$ 94,100
Workings:
Predetermined OH Rate = $1,080,000 / (2,000 hrs per mth x 12 mths) = $45 per dlh
a
b
c
d
e
Account Bal as at: 1 March
Mat Added in March
Lab Added in March
Applied OH ( = f x $45)
Total Costs ( = a + b + c + d)
Status at end of March
f
Direct Labour hours ( = c / $20)
Job # 201
$21,000
$6,000
$4,000
$9,000
$40,000
CoGS
Job # 202
$17,000
$9,000
$8,000
$18,000
$52,000
FG
200
400
Job # 203
Job # 204
$15,000
$14,000
$31,500
$60,500
WIP
$11,000
$12,000
$27,000
$50,000
CoGS
700
Actual OH
=
$89,000 (given)
Applied OH = $9,000 + $18,000 + $31,500 + $27,000
Actual OH (given)
Under-Applied OH
=
=
=
$85,500
$89,600
$ 4,100
Total CoGS (before adjustment) = $40,000 + $50,000
Plus Under-Applied OH
CoGS (after adjustment)
=
=
=
$90,000
$ 4,100
$94,100
600
Question 5
Answer: [__$114,000______]
Workings:
DM
DL
MOH
TOTAL
80,000
800*(54,000/1,800) = 24,000
1,000*(20,000/2,000) = 10,000
114,000
6