PRACTICE SET
Solutions are presented at the end of the practice set. Please be
vigilant in remembering the terms used for each required item and how
each item was computed. ENJOY!!!!!!!!!!!!!
PROBLEM 1: On October 1, the general ledger of Slipshod Company had
the following accounts and balances:
The subsidiary ledgers had the following information on October 1:
During October, the following costs were incurred on account:
A summary of the materials requisition slips and the
tickets for the month revealed the following distribution:
labor
time
Overhead is applied based upon direct labor cost. Jobs B81, B83, and
B84 were for 8,000, 6,000 and 4,800 units of product respectively, and
were completed during October. Jobs B80, B81, B82, and B83 were sold
on account for $150,000.
Required: Prepare T-accounts for a job order cost system, posting the
beginning balances and all transactions for the month. Clearly
indicate the ending balances for the accounts and label the 'cost of
goods manufactured' and 'cost of goods sold' amounts.
1
PROBLEM 2: The following selected data were taken from the records of
the Bixby Box Company. The company uses a job costing system to
account for its manufacturing costs. Bixby's fiscal year runs from
January 1 to December 31; manufacturing overhead is closed out only at
the end of the fiscal year. The following information relates to
August operations.
(1.) Jobs in process on August 1.
(2.) Jobs completed during August: W12, X13, Y14.
(3.) Material requisitions and labor time tickets
following:
indicated
the
(4.) Jobs sold during August: W12, X13.
(5.) Bixby applies overhead to production based upon labor costs.
(6.) Selected account balances on August 1 were:
(7.) Various overhead incurred (excluding indirect materials and
indirect labor) during August, $13,500.
(8.) Materials (direct and indirect) purchased during August, $10,905.
Required:
(a) What is the balance in the Material Inventory account on August
31?
(b) Is the manufacturing overhead account over-or underapplied on
August 31? By how much?
(c) Compute the cost of goods manufactured for August.
(d) Compute the cost of goods sold for August.
(e) What is the balance of the Work-in-Process Inventory account on
August 31?
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PROBLEM 3: Shawano Corporation applies overhead based upon machinehours. Budgeted factory overhead was $266,400 and budgeted machinehours were 18,500. Actual factory overhead was $287,920 and actual
machine-hours were 19,050. Before disposition of over- or underapplied
overhead, the cost of goods sold was $560,000 and ending inventories
were as follows:
Required:
a. Compute the amount of overhead applied to production.
b. Prepare the journal entry to dispose of the over/under-applied
overhead using the write-off to cost of goods sold approach.
c. Prepare the journal entry to dispose of the over/under-applied
overhead using the proration approach.
PROBLEM 4: Danner Corporation applies overhead based upon machinehours. Budgeted factory overhead was $375,000 and budgeted machinehours were 12,500. Actual factory overhead was $387,920 and actual
machine-hours were 13,150.
Required:
a. Compute the overhead application rate.
b. Compute the amount of overhead applied to production.
c. Determine the amount of over- or underapplied overhead.
3
SOLUTIONS
SOLUTION: SLIPSHOD
Required: Prepare T-accounts for a job order cost system, posting the
beginning balances and all transactions for the month. Clearly
indicate the ending balances for the accounts and label the 'cost of
goods manufactured' and 'cost of goods sold' amounts.
Feedback:
Overhead rate: B81: 8,750/7,000 = 125%
Labor B83: 11,500/125% = 9,200
Job B83 BWIP: 4,300 + 9,200 + 11,500 = 25,000
Job B81 BWIP: 48,750 - 25,000 = 23,750
Direct Labor: 49,000 - 4,500 indirect = 44,500
Direct Materials: 8,000 + 5,100 + 8,600 + 19,900 + 12,750 = 54,350
Indirect materials: 58,250 - 54,350 = 3,900
Applied OH: 44,500  125% = 55,625
Job B86 labor: 44,500 - (4,000 + 1,700 + 10,500 + 16,750) = 11,550
Cost of Jobs:
B80: $5,200
B81: 23,750 + 8,000 + 4,000 + 5, 000 = $40,750
B82: BFG 8,100 - B80 5,200 = $2,900
B83: 25,000 + 5,100 + 1,700 + 2,125 = $33,925
B84: 8,600 + 10,500 + 13,125 = $32,225
B85: 19,900 + 16,750 + 20,937.50 = $57,587.50
B86: 12,750 + 11,550 + 14,437.50 = $38,737.50
COGM: B81 + B83 + B84 = $40,750 + 33,925 + 32,225 = $106,900
COGS: B80 + B81 + B82 + B83 = $5,200 + 40,750 +2,900 + 33,925 =
$82,775
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SOLUTION: BIXBY
(a) $7,880
(b) underapplied by $1,900
(c) $27,835
(d) $16,530
(e) $7,020
Feedback:
(a) $5,175 + 10,905 - (610 + 370 + 2,780 + 4,050 + 390) = ending
balance = $7,880
(b) overhead in Work-in-Process Inventory, August 1: $9,555 - (800 +
1,000) - (1,200 + 1,620) = $4,935; overhead rate = $4,935/$2,820 =
175% of Direct Labor Costs
MOH debits: IM $390 + IL 540 + incurred 13,500 = $14,430
MOH credits: Beg Bal 1,400 + applied 11,130 = $12,530
Ending MOH: $14,430 - 12,530 = $1,900 debit balance: underapplied
(d) W12 + X13: $6,800 + $9,730 = $16,530
(e) Job Z15: Material ($4,050) + Labor ($1,080) + Overhead ($1,890) =
$7,020
SOLUTION: SHAWANO
(a) $274,320
Feedback:
(a) rate = $266,400/18,500 = $14.40/hr; 19,050 hrs  $14.40 = $274,320
(b) actual - applied = $287,920 - 274,320 = $13,600 underapplied
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SOLUTION: DANNER
(a)
(b)
(c)
$30 per machine hour
$394,500
$6,580 overapplied
Feedback:
(a) rate = $375,000/12,500 hrs = $30/hr
(b) 13,150  $30 = $394,500
(c) $387,920 actual - 394,500 applied = $6,580 overapplied
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