Job Order Costing Practice Problem 1
Davis Manufacturing, Inc.
1994 Manufacturing Overhead Budget
Insurance
Indirect Labor
Indirect Material
Factory Rent
Equipment Rent
Utilities
TOTAL
Budgeted number of DLH:
Budgeted machine hours:
42,000
100,000
75,000
120,000
50,000
60,000
447,000
20,000
60,000
If overhead is applied based on direct labor hours, what is the predetermined overhead rate for
1994?
If overhead is applied based on machine hours, what is the predetermined overhead rate for
1994?
If we pay our workers $9/hour and overhead is applied based on direct labor dollars, what is the
predetermined overhead rate for 1994?
Assume that Davis Manufacturing applies overhead based on direct labor hours. Job 1356
yielded 1500 units and was completed in 200 direct labor hours. Direct material costs for the job
totals $10,575. Calculate the unit cost for Job 1356.
3-1
Job Order Costing Practice Problem 2
The following data has been collected for Department 203 for 1993.
Work in process as of 1/1/93:
Job No.
1376
Material
$ 17,500
Labor
$ 22,000
Overhead
$ 33,000
Total
$ 72,500
Actual costs incurred by Department 203 during 1993:
By Job:
1376
1377
1378
1379
TOTAL
$ 1,000
26,000
12,000
4,000
$ 43,000
$ 7,000
53,000
9,000
1,000
$ 70,000
Not incurred by job:
Indirect Materials
Indirect Labor
Employee Benefits
Depreciation
Supervision
TOTAL
$ 15,000
53,000
23,000
12,000
20,000
$123,000
Department 203 Overhead Budget for 1993:
Indirect Materials
Indirect Labor
Employee Benefits
Supervision
Depreciation
TOTAL
$ 16,000
56,000
24,000
20,000
12,000
$128,000
Budgeted Direct Labor Dollars $ 80,000
Balances at 12/31/93, before disposition of over/under applied overhead:
Finished Goods Inventory
$106,000
Cost of Goods Sold
852,000
Overhead is applied based on direct labor dollars.
Use this information to complete the questions on the following page.
3-2
$ 8,000
79,000
21,000
5,000
1.
What is the predetermined overhead rate for 1993 for Department 203?
2.
Apply overhead to each of the jobs worked on in 1993.
3.
Jobs 1376 and 1377 were completed during 1993. The jobs yielded 5,000 and 3,000
units of product, respectively. What was the unit cost for each of these products?
4.
What is the value of work in process inventory on 12/31/93? What jobs are included?
5.
Was overhead over- or underapplied for 1993 in Department 203? By how much?
3-3
Job Order Costing Practice Problem 3
At the beginning of the current year, Maple Products had the following inventory amounts on its
balance sheet:
Raw materials
$12,000
Work in process
20,000
Finished goods
35,000
Maple Products estimated that it would incur $60,000 in manufacturing overhead during the year,
and that it would operate at a level of 15,000 direct labor hours. During the current year, the
following transactions were completed:
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
L.
Purchased raw material on account, $8,000.
Raw materials were issued to production, $16,000. 90% of these materials were direct,
and 10% were indirect.
Factory payrolls were paid, $49,000. 80% of the factory payroll was direct labor, and 20%
was indirect labor. 14,000 direct labor hours were worked.
Administrative payrolls were paid, $12,00. Sales payrolls were paid, $10,000.
Depreciation on factory equipment, $8,000.
Factory utilities paid, $7,000.
Various administrative expenses incurred and paid, $20,000
Various selling expenses incurred and paid, $15,000.
Various manufacturing overhead costs incurred and paid (other than those indicated
above), $30,000.
Manufacturing overhead was applied to production.
Completed production for the current year, $106,600.
Sales to customers for the current year were:
Selling price
$160,000
Cost
?
(Ending finished goods inventory, $21,600)
Required:
1.
Prepare T-accounts for Raw Materials, FOH, Work in Process, Finished Goods, and Cost
of Goods Sold. Post the appropriate parts of your journal entries to these T-accounts to
determine the ending balance in each account. (Don't forget to enter the opening
balances in the inventory accounts.)
3-4
Job Order Costing Practice Problem 4
Estimated cost and operating data for the forthcoming period for three companies are given
below:
Direct labor hours
Manufacturing overhead
Machine hours
Direct labor cost
Company A
12,000
$90,000
20,000
$60,000
Company B
15,000
$120,000
20,000
$ 75,000
Company C
20,000
$150,000
25,000
$100,000
Predetermined OH
rates are based on
Direct Labor
hours
Direct Labor
cost
Machine
hours
Required:
1.
2.
3.
Compute the predetermined overhead rate to be used in the forthcoming period for each
company.
Assume for Company B that $80,000 of direct labor cost actually is incurred. How much
overhead will be applied to work in process?
Assume for Company C that 30,000 machine hours are actually worked during the
forthcoming period. How much overhead will be applied to work in process? If actual
overhead costs total $175,000 will overhead be over- or under-applied? By how much?
3-5
Job Order Costing Practice Problem 5
The Carter Company began operations on January 2, 19x5. The following activity took place in
the work in process account for the month of January:
Direct materials
Direct labor
Manufacturing OH
Work in
10,000
30,000
45,000
Progress
To finished goods
79,000
The Carter Company uses a job order costing system, and applies manufacturing overhead to
work in process on a basis of direct labor cost. At the end of January, only one job was still in
process. This job (Job 15) has been charged with $2,000 in direct materials cost.
Required:
Complete the following job cost sheet for partially completed Job 15:
Job Cost Sheet-Job 15 (as of January 31, 19x5)
Direct materials
$
Direct labor
$
Manufacturing overhead
$
Total cost to January 31
3-6
$
Job Order Costing Practice Problem 6
Selected ledger accounts of the Barnaby Company are given below for the year 19x8:
Raw materials
Jan 1 15,000
19x8 debits 50,000
Dec 31 12,000
Jan 1
DM
DL
OH
Dec 31
Work in
35,000
48,000
60,000
75,000
?
Finished
Jan 1 60,000
19x8 debits
?
Dec 31 48,000
inventory
19x8 credits ?
Manufacturing
19x8 debits 74,000
overhead
19x8 credits ?
Process
19x8 credits
188,000
Factory wages
19x8 debits 67,000
payable
Jan 1
19x8 credits
Goods
19x8 credits
Cost of
19x8 debits ?
?
4,000
66,000
Goods Sold
Required:
1.
2.
3.
4.
5.
6.
7.
What was the actual manufacturing overhead cost incurred during 19x8?
How much of the actual manufacturing overhead in part (1) consisted of indirect
materials?
How much of the actual manufacturing overhead in part (1) consisted of indirect labor?
What was the cost of goods manufactured for 19x8?
What was the cost of goods sold for 19x8?
If overhead is applied to production on a basis of direct labor cost, what rate was in effect
for 19x8?
Was manufacturing overhead over- or under-applied for 19x8? By how much?
3-7
Job Order Costing Practice Problem 7
Alex Company uses a job order cost system. The company uses predetermined overhead rates,
based on direct labor hours, in applying manufacturing overhead to jobs. Estimated cost and
operating data for 1994 are given below:
Estimated direct labor hours
Estimated direct labor cost
Estimated manufacturing overhead
30,000
$ 90,000
$ 120,000
At the end of 1994, Alex Company’s cost records revealed the following actual cost and operating
data:
Direct labor hours
Direct labor cost
Manufacturing overhead
Raw materials inventory
Work in process inventory
Finished goods inventory
Cost of goods sold
32,000
$ 68,000
$ 130,000
$ 8,000
$ 25,000
$ 50,000
$ 175,000
REQUIRED
1.
Compute Alex Company’s predetermined overhead rate for 1994.
2.
Compute the underapplied or overapplied manufacturing overhead for 1994.
3-8