Chapter 22
Job Order Cost Accounting
Questions
1.
Overhead is not clearly linked with specific units (jobs) or batches (job lots). Therefore, an
estimate on the relationship between factory overhead cost and job or job lot is necessary.
2.
Machine hours.
3.
The job order cost sheet captures information on cost and quantity of direct material and
direct labour, and amount of factory overhead applied to the respective job or job lot.
Management and employees use this information to monitor cost during production and to
estimate total cost of production. In the case of a service company, the information on the job
cost sheet is modified to meet the needs of managers.
4.
Each job is assigned a subsidiary ledger account. This account serves as the posting
account during production for direct material, direct labour, and applied factory overhead.
Once a product is completed this account remains as the completed product moves to
finished goods and then cost of goods sold. At any time, management and employees can
see the costs, direct and indirect, associated with any job.
5.
A debit to work in process for direct materials, a debit to factory overhead for indirect
materials, and a credit to raw materials.
6.
The material requisition slip is designed to track the movement of materials from raw
materials to production. That is, it is an internal control document, and, without the slip, the
inventory control department should not release inventory to production.
7.
The clock card is used to record total payroll, while the time ticket is used to capture how
much time is spent on each job.
8.
Debits to factory overhead are the recording of actual overhead cost, such as indirect
materials, indirect labour, factory rent, and factory insurance. Credits represent the allocation
of factory overhead to jobs or job lots.
9.
In most cases, the amount of over- or underapplied overhead is closed to cost of goods sold.
Only if the amount is significant, and would change the information value in decision making,
would the amount of over- or underapplied overhead be allocated to goods in process,
finished goods, and cost of goods sold.
10.
This job should be counted as a job lot (batch). Although individual pairs could be viewed as
individual jobs, the cost of this information would outweigh the benefits. Determining the cost
of the batch should provide management and employees with sufficient information about
this product.
11.
Calculating a predetermined overhead allocation facilitates managers in their planning
process. Moreover, it allows managers to estimate total costs of a job or job lot, which can be
helpful in quoting a price to potential customers. It is important to realize that actual overhead
costs at the end of the period may be different from estimated amounts.
12.
Each patient is viewed as a job. Therefore, a job order cost sheet would be used to capture
cost of supplies, direct labour, and hospital overhead.
13.A
Seven unique accounts used in general accounting systems for manufacturers are: Raw
Materials Inventory, Raw Materials Purchases, Direct Labour, Factory Overhead, Goods in
Process Inventory, Finished Goods Inventory, and Manufacturing Summary. (appendix)
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32
Fundamental Accounting Principles, Eleventh Canadian Edition
QUICK STUDY
Quick Study 22-1
a.
Factory overhead ($131,000) ÷ Direct labour ($524,000) = 25%
b.
Factory overhead ($131,000) ÷ Direct materials ($655,000) = 20%
Quick Study 22-2
Job: 2, 3, 4; Job lot: 1, 5, 6
Quick Study 22-3
Direct materials cost:
R-1289.....................................................................
R-4615.....................................................................
Direct labour cost:
W-3103....................................................................
W-3429....................................................................
W-3454....................................................................
Overhead ($1,550 × 130%) .........................................
Total cost.....................................................................
$1,350
1,100
$2,450
700
450
400
1,550
2,015
$6,015
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Solutions Manual for Chapter 22
33
Quick Study 22-4
Raw Materials Inventory .........................................................
Cash ...............................................................................
Goods in Process Inventory ...................................................
Factory Overhead...................................................................
Raw Materials Inventory .................................................
45,000
28,000
13,000
45,000
41,000
Quick Study 22-5
Factory Payroll .......................................................................
Cash ...............................................................................
Goods in Process Inventory ...................................................
Factory Overhead...................................................................
Factory Payroll................................................................
135,000
107,000
28,000
135,000
135,000
Quick Study 22-6
Goods in Process Inventory [Job—100 pairs of ice skates]
[110,000 × 140%] ...............................................................
Factory Overhead ...........................................................
154,000
154,000
Quick Study 22-7
Predetermined allocation overhead rate for 2005 is:
(a) $974,000 ÷ $386,000 = 252.33% of direct labour $
(b) $974,000 ÷ 20,000 hours = $48.70 per direct labour hour
($386,000 ÷ $19.30 = 20,000 hours)
Quick Study 22-8
Direct labour = $26 per hour × 220 hours.................... $5,720
Overhead = $12 per hour × 220 hours ......................... 2,640
Total estimated cost ................................................... $8,360
Quick Study 22-9
Actual overhead..............................................................
Overhead applied ($500,000 × 160%)............................
Underapplied overhead ..................................................
$850,000
800,000
$ 50,000
Cost of Goods Sold ................................................................
Factory Overhead ...........................................................
50,000
50,000
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34
Fundamental Accounting Principles, Eleventh Canadian Edition
Quick Study 22-10A
a.
Manufacturing Summary
b.
Raw Materials Purchases, Direct Labour, Factory Overhead
Quick Study 22-11A
Dec.
31
Manufacturing Summary.........................................
Raw Materials Inventory..................................
Goods in Process Inventory ............................
Raw Materials Purchases ...............................
Direct Labour ..................................................
Factory Overhead ...........................................
446,000
31
Raw Materials Inventory .........................................
Goods in Process Inventory....................................
Manufacturing Summary .................................
17,000
16,600
18,000
16,000
85,000
107,000
220,000
33,600
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Solutions Manual for Chapter 22
35
EXERCISES
Exercise 22-1
1.
2.
3.
4.
5.
6.
7.
e
g
d
c
f
a
b
Exercise 22-2
a.
The cost of direct materials requisitioned in the month equals the total direct materials costs
accumulated on the three jobs less the amount of direct materials cost assigned to Job 102 in
May:
Job 102.......................................................................
Less prior costs ..........................................................
Job 103.......................................................................
Job 104.......................................................................
Total requisitioned ......................................................
b.
Direct labour cost incurred in the month equals the total direct labour costs accumulated on the
three jobs less the amount of direct labour cost assigned to Job 102 in May:
Job 102.......................................................................
Less prior costs ..........................................................
Job 103.......................................................................
Job 104.......................................................................
Total direct labour.......................................................
c.
$14,000
(6,000)
30,000
27,000
$65,000
$ 9,000
(1,800)
11,200
21,000
$39,400
The predetermined overhead application rate equals the ratio between the amount of overhead
assigned to the jobs divided by the amount of direct labour cost assigned to them. Because the
same rate was used for all jobs started and completed within a month, the ratio for any one of
them equals the rate that was applied. This table shows the ratio for Jobs 102 and 104:
Job 102
Overhead....................................................................
Direct labour ...............................................................
Ratio ...........................................................................
$14,000
11,200
125%
Job 104
$26,250
21,000
125%
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36
Fundamental Accounting Principles, Eleventh Canadian Edition
Exercise 22-2 (concluded)
d.
The cost transferred to finished goods in June equals the total costs of the two completed jobs
for the month, which were Jobs 102 and 103:
Direct materials ................................
Direct labour.....................................
Overhead .........................................
Total cost..........................................
Job 102
Job 103
Total
$14,000
9,000
11,250
$34,250
$30,000
11,200
14,000
$55,200
$44,000
20,200
25,250
$89,450
Exercise 22-3
a.
b.
Estimated overhead costs
Estimated direct labour
=
$672,000
= 160%
$420,000
Direct labour ............................................................
Overhead ($3,350 × 160%) .....................................
Total cost of Job No. 13-56 .....................................
3,350
5,360
$8,710
Exercise 22-4
a.
Overhead costs ($436,800) ÷ Direct labour costs ($336,000) = 130%
b.
Total cost of job in process ............................................. $ 624,800
Less materials costs of job in process ............................ (348,800)
Labour and overhead assigned.......................................
276,000
Because overhead is 130% of labour
Labour + overhead = 230% of labour
Labour costs of job ($276,000 ÷ 230%) .......................... (120,000)
Overhead ($120,000 × 130%)......................................... $ 156,000
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Solutions Manual for Chapter 22
37
Exercise 22-5
a.
Cost of direct materials used:
Beginning raw materials inventory ..........................
Plus purchases .......................................................
Less indirect materials ............................................
Less ending raw materials inventory ......................
Cost of direct materials used ..................................
$ 27,000
195,000
(15,000)
(46,000)
$161,000
b.
Cost of direct labour used:
Total factory payroll ................................................
Less indirect labour ................................................
Cost of direct labour used.......................................
$405,000
(85,000)
$320,000
c.
Cost of goods manufactured:
Beginning goods in process inventory ....................
Plus direct materials used.......................................
Plus direct labour....................................................
Plus overhead applied (62.5%)...............................
Total cost of goods in process ................................
Less ending goods in process inventory.................
Cost of goods manufactured...................................
d.
Cost of goods sold:
Beginning finished goods inventory ........................
Plus cost of goods manufactured ...........................
Less ending finished goods inventory.....................
Cost of goods sold ..................................................
e.
Gross profit:
Sales.......................................................................
Cost of goods sold ..................................................
Gross profit .............................................................
$
9,200
161,000
320,000
200,000
690,200
(18,700)
$671,500
$ 60,000
671,500
(33,300)
$698,200
$1,540,000
(698,200)
$ 841,800
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38
Fundamental Accounting Principles, Eleventh Canadian Edition
Exercise 22-6
a.
Raw Materials Inventory.........................................................
Cash ...............................................................................
195,000
b.
Goods in Process Inventory ...................................................
Raw Materials Inventory .................................................
161,000
c.
Factory Overhead ..................................................................
Raw Materials Inventory .................................................
15,000
d.
Factory Payroll .......................................................................
Cash ...............................................................................
405,000
e.
Goods in Process Inventory ...................................................
Factory Payroll ...............................................................
320,000
f.
Factory Overhead ..................................................................
Factory Payroll ...............................................................
85,000
g.
Factory Overhead ..................................................................
Other Accounts...............................................................
100,600
h.
Goods in Process Inventory ...................................................
Factory Overhead...........................................................
200,000
i.
Finished Goods Inventory ......................................................
Goods in Process Inventory ...........................................
671,500
j.
Cost of Goods Sold ................................................................
Finished Goods Inventory...............................................
698,200
Cash.......................................................................................
Sales ..............................................................................
1,540,000
195,000
161,000
15,000
405,000
320,000
85,000
100,600
200,000
671,500
698,200
1,540,000
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Solutions Manual for Chapter 22
39
Exercise 22-7
1.
Predetermined overhead application rate for 2002:
Estimated overhead costs ......................................
Estimated direct labour costs..................................
Rate (overhead ÷ direct labour) ..............................
2. & 3.
$1,260,000
$ 840,000
150.0%
Overhead applied to jobs = 150% × $784,000 = $1,176,000
Overhead
Incurred
Underapplied
4.
Dec.
1,414,000
31 Cost of Goods Sold .................................................
Overhead.........................................................
Direct
Labour
Types of Jobs
Completed and sold.....................
Finished goods ............................
Goods in process.........................
Total ............................................
31
1,176,000
238,000
5.
Dec.
Applied
$588,000
78,400
117,600
$784,000
Cost of Goods Sold .................................................
Finished Goods Inventory .......................................
Goods in Process Inventory ....................................
Factory Overhead............................................
238,000
% of
Total
75.0%
10.0
15.0
100.0%
178,500
23,800
35,700
238,000
Adjustment to
Overhead
% × $238,000
$178,500
23,800
35,700
$238,000
238,000
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40
Fundamental Accounting Principles, Eleventh Canadian Edition
Exercise 22-8
1.
Predetermined overhead application rate for 2004:
Estimated overhead costs .......................................
Estimated direct labour costs ..................................
Rate (overhead ÷ direct labour)...............................
2. & 3.
$900,000
$600,000
150.0%
Overhead applied to jobs = 150% × $560,000 = $840,000
Factory Overhead
Incurred
Underapplied
4.
1,010,000
Cost of Goods Sold ................................................................
Factory Overhead...........................................................
Direct
Labour
Types of Jobs
Completed and sold ....................
Finished goods ............................
Goods in process ........................
Total ............................................
31
840,000
170,000
5.
Dec.
Applied
$420,000
84,000
56,000
$560,000
Cost of Goods Sold.................................................
Finished Goods Inventory .......................................
Goods in Process Inventory....................................
Factory Overhead ...........................................
170,000
% of
Total
75.0%
15.0
10.0
100.0%
127,500
25,500
17,000
170,000
Adjustment to
Overhead
% × $170,000
$127,500
25,500
17,000
$170,000
170,000
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Solutions Manual for Chapter 22
41
Exercise 22-9A
Account
Raw Materials
Inventory
Balance at
Beginning
of Year
Entries to
Account
Prior to
Closing
Cost of raw
materials on
hand at end
of prior year
None
Raw Materials
Purchases
Zero
Direct Labour
Closing Entries
Made to
Account
Closed
at End
of Year?
Financial
Statements
Which Balance
Reported
Credited for
beginning
balance;
debited for
ending balance
No
Debited for
cost of
materials
purchased
Credited for
pre-closing
balance
Yes
Manufacturing
Statement
Zero
Debited for
cost of
labour
efforts used
Credited for
pre-closing
balance
Yes
Manufacturing
Statement
Factory
Overhead
Zero
Debited for
cost of
overhead
used
Credited for
pre-closing
balance
Yes
Manufacturing
Statement
Goods in
Process
Inventory
Cost of
goods in
process on
hand at end
of prior year
None
Credited for
beginning
balance;
debited for
ending balance
No
Manufacturing
Statement
Finished Goods
Inventory
Cost of
finished
goods on
hand at end
of prior year
None
Credited for
beginning
balance;
debited for
ending balance
No
Zero
None
Debited for
manufacturing
costs incurred;
credited for
ending balances
of RM and GIP
inventories and
for resulting
balance
Yes
Manufacturing
Summary
Manufacturing
Statement
Balance Sheet
Balance Sheet
Balance Sheet
Income
Statement (Cost
of Goods Sold)
None
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42
Fundamental Accounting Principles, Eleventh Canadian Edition
Exercise 22-10A
2004
Dec. 31
Manufacturing Summary.........................................
Raw Materials Inventory..................................
Goods in Process Inventory ............................
Raw Materials Purchases ...............................
Direct Labour ..................................................
Factory Overhead ...........................................
277,440
Raw Materials Inventory .........................................
Goods in Process Inventory....................................
Manufacturing Summary .................................
19,440
25,200
31
Income Summary....................................................
Manufacturing Summary .................................
Finished Goods Inventory ...............................
Selling Expenses ............................................
General and Administrative Expenses ............
Income Taxes Expense...................................
378,240
31
Finished Goods Inventory .......................................
Sales.......................................................................
Income Summary ............................................
15,840
422,400
Income Summary....................................................
Retained Earnings ..........................................
60,000
31
31
12,480
17,040
67,200
99,120
81,600
44,640
232,800
10,320
45,840
41,760
47,520
438,240
60,000
Exercise 22-11A
a.
Overhead rate = Total overhead cost ÷ Total direct labour cost
= $1,512,500 ÷ $2,016,000 = 75%
b.
Total cost of goods in process inventory ................................
Deduct: Direct labour .............................................................
Deduct: Factory overhead ($16,000 × 75% = 12,000) ...........
Direct materials ......................................................................
$57,000
16,000
12,000
$29,000
c.
Total cost of finished goods inventory ....................................
Direct materials ......................................................................
Direct labour and factory overhead costs...............................
$473,000
273,000
$200,000
We also know that the total of direct labour cost (x) and factory overhead cost (.75x) equals
$200,000. Thus, to get the respective amounts solve (x + .75x = $200,000).
1.75x = $200,000
Therefore, x = $200,000 ÷ 1.75 = $114,286
Direct labour costs = $114,286
Factory overhead costs = $114,286 × .75 = $85,714
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Solutions Manual for Chapter 22
43
Exercise 22-12A
a.
Overhead rate
= Total overhead cost ÷ Total direct labour cost
= $443,200 ÷ $277,000 = 160%
b.
Cost of ending inventories:
Direct materials ....................
Direct labour.........................
Factory overhead
(160% of labour).............
Total .....................................
c.
Goods in Process
Cost
Total
per Unit Units
Cost
Finished Goods
Cost
Total
per Unit Units
Cost
$10.50
7.00
4,500
4,500
$ 47,250
31,500
$12.80
9.00
11,700
11,700
$149,760
105,300
11.20
4,500
50,400
$129,150
14.40
11,700
168,480
$423,540
Cost of goods sold:
In aggregate:
Beginning inventories ............................................. $
– 0–
Direct materials cost ...............................................
460,000
Direct labour cost....................................................
277,000
Factory overhead cost ............................................
443,200
Total cost of goods in process ................................
$1,180,200
Ending goods in process inventory .............................
(129,150)
Ending finished goods inventory.................................
(423,540)
Cost of goods sold ......................................................
$627,510
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44
Fundamental Accounting Principles, Eleventh Canadian Edition
Exercise 22-13A
Part 1
Indirect labour .............................................................
Factory utilities ............................................................
Repairs, factory equipment .........................................
Rent on factory building...............................................
Property taxes on factory building ...............................
Factory insurance expired ...........................................
Factory supplies used .................................................
Amortization of factory equipment ...............................
Amortization of patents................................................
Total overhead cost.....................................................
$194,220
109,440
30,060
84,600
19,260
16,020
34,920
82,800
13,680
$585,000
Total direct labour cost ................................................
$450,000
Overhead rate ($585,000 ÷ $450,000) ........................
130.0%
Cost of ending goods in process:
Direct materials ................................
Direct labour.....................................
Overhead (130% of labour) ..............
Total .................................................
Per Unit
Units
Total
$18.00
7.50
9.75
4,500
4,500
4,500
$ 81,000
33,750
43,875
$158,625
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Solutions Manual for Chapter 22
45
Exercise 22-13A (continued)
Part 2
ROXANNE COMPANY
Manufacturing Statement
For Year Ended December 31, 2004
Direct materials:
Raw materials inventory, December 31, 2003..........................
Raw materials purchases .........................................................
Raw materials available for use................................................
Raw materials inventory, December 31, 2004..........................
Direct materials used................................................................
Direct labour...................................................................................
Factory overhead costs:
Indirect labour...........................................................................
Factory utilities .........................................................................
Repairs, factory equipment.......................................................
Rent on factory building............................................................
Property taxes on factory building ............................................
Factory insurance expired ........................................................
Factory supplies used ..............................................................
Amortization of factory equipment ............................................
Amortization of patents.............................................................
Total factory overhead costs ....................................................
Total manufacturing costs ..............................................................
Add goods in process inventory, December 31, 2003 ....................
Total goods in process ...................................................................
Deduct goods in process inventory, December 31, 2004 ...............
Cost of goods manufactured ..........................................................
$ 84,600
311,400
396,000
(91,080)
194,220
109,440
30,060
84,600
19,260
16,020
34,920
82,800
13,680
$ 304,920
450,000
585,000
1,339,920
99,360
1,439,280
(158,625)
$1,280,655
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46
Fundamental Accounting Principles, Eleventh Canadian Edition
Exercise 22-13A (concluded)
Part 3
2004
Dec. 31
31
31
Manufacturing Summary.........................................
Raw Materials Inventory..................................
Goods in Process Inventory ............................
Raw Materials Purchases ...............................
Direct Labour ..................................................
Indirect Labour ................................................
Factory Utilities ...............................................
Repairs, Factory Equipment............................
Rent on Factory Building.................................
Property Taxes on Factory Building ................
Factory Insurance Expired ..............................
Factory Supplies Used ....................................
Amortization of Factory Building .....................
Amortization of Patents ...................................
1,530,360
Raw Materials Inventory .........................................
Goods in Process Inventory....................................
Manufacturing Summary .................................
91,080
158,625
Income Summary....................................................
Manufacturing Summary .................................
1,290,655
Overhead rate ($585,000 ÷ $304,920) ...........................
191.9%
84,600
99,360
311,400
450,000
194,220
109,440
30,060
84,600
19,260
16,020
34,920
82,800
13,680
249,705
1,290,655
Part 4
Using an overhead rate based on direct materials would result in a significantly larger ending goods
in process inventory. This is because direct materials cost per unit is more than direct labour per
unit and the overhead rate using materials costs is larger than the 130% rate using direct labour
costs. On the manufacturing statement, the ending goods in process inventory is subtracted from
the total goods in process to yield the cost of goods manufactured. Therefore, the cost of goods
manufactured for 2002 would be less using an overhead rate based on direct materials. Without
further data about individual jobs or job lots, it is difficult to see that the ending goods in process
inventory work consists of a greater percentage of material than the work that has been completed
and moved to finished goods. This results, however, in a greater amount of factory overhead
applied to ending goods in process inventory.
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Solutions Manual for Chapter 22
47
PROBLEMS
Problem 22-1A
Part 1
Total of each manufacturing cost and each job:
206
207
From June:
Direct materials..............
Direct labour ..................
*Applied overhead .........
$ 19,600
25,200
15,120
$ 25,200
22,400
13,440
For July:
Direct materials..............
Direct labour ..................
*Applied overhead .........
Total costs .....................
140,000
42,000
25,200
$267,120
238,000
78,400
47,040
$424,480
208
$112,000
168,000
100,800
$380,800
Total
for July
$490,000
288,400
173,040
Total current period costs plus beginning work in process = $1,072,400
*Equals 60% of the direct labour cost.
Part 2
Journal entries for June:
a.
Raw Materials Inventory .........................................................
Accounts Payable ...........................................................
Factory Payroll .......................................................................
Cash ...............................................................................
Factory Overhead...................................................................
Raw Materials Inventory .................................................
Factory Overhead...................................................................
Factory Payroll................................................................
Factory Overhead...................................................................
Cash ...............................................................................
Factory Overhead...................................................................
Cash ...............................................................................
Factory Overhead...................................................................
Accumulated Amortization, Factory Equipment ..............
560,000
308,000
42,000
27,440
39,200
23,520
54,880
560,000
308,000
42,000
27,440
39,200
23,520
54,880
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48
Fundamental Accounting Principles, Eleventh Canadian Edition
Problem 22-1A Part 2 (continued)
b.
Goods in Process Inventory ...................................................
Raw Materials Inventory .................................................
Goods in Process Inventory ...................................................
Factory Payroll ...............................................................
Goods in Process Inventory ...................................................
Factory Overhead...........................................................
490,000
Finished Goods Inventory ......................................................
Goods in Process Inventory ...........................................
691,600
d.
Cost of Goods Sold ................................................................
Finished Goods Inventory...............................................
267,120
e.
Cash.......................................................................................
Sales ..............................................................................
532,000
f.
Cost of Goods Sold ................................................................
Factory Overhead...........................................................
14,000
c.
490,000
288,400
288,400
173,040
173,040
691,600
$267,120 + $424,480 = $691,600
267,120
532,000
$42,000 + $27,440 + $39,200 + $23,520 + $54,880 – $173,040 = $14,000
14,000
Part 3
BEAVER COMPANY
Manufacturing Statement
For Month Ended July 31, 200X
Direct materials used...................................................
Direct labour used .......................................................
Factory overhead:
Indirect materials .....................................................
Indirect labour..........................................................
Factory rent .............................................................
Factory utilities ........................................................
Amortization of equipment.......................................
Total manufacturing costs ...........................................
Add goods in process inventory,
June 30 (Jobs 206 & 207) .......................................
Total goods in process during the month ....................
Deduct goods in process inventory,
July 31 (Job 208).....................................................
Cost of goods manufactured (Jobs 206 & 207) ...........
$ 490,000
288,400
$42,000
27,440
39,200
23,520
54,880
187,040
965,440
120,960
1,086,400
(380,800)
$ 705,600
(Note: The cost of goods manufactured does not equal the sum of the costs of Jobs
206 and 207 because of the $14,000 underapplied overhead.)
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Solutions Manual for Chapter 22
49
Problem 22-1A Part 3 (concluded)
On the income statement for the month ended July 31:
Sales...........................................................................
Cost of goods sold ($267,120 + $14,000)...................
Gross profit .................................................................
$ 532,000
(281,120)
$ 250,880
On the July 31 balance sheet:
Inventories:
Raw materials .........................................................
Goods in process....................................................
Finished goods .......................................................
Total inventories .....................................................
$ 168,000*
380,800
424,480
$ 973,280
*Beginning raw materials inventory........................
Purchases.............................................................
Direct materials used ............................................
Indirect materials used..........................................
Ending raw materials inventory .............................
$140,000
560,000
(490,000)
(42,000)
$ 168,000
Part 4
Factory overhead is underapplied by $14,000. This means that individual jobs or batches are
undercosted. Therefore, profit analysis at the product level in total will also be overstated.
Problem 22-2A
Part 1
a.
Dec.
31 Goods in Process Inventory ....................................
Raw Materials Inventory ..................................
10,200
31 Goods in Process Inventory ....................................
Factory Payroll ................................................
15,000
31 Goods in Process Inventory ....................................
Factory Overhead............................................
31,500
To record the direct materials costs for
Jobs 402 and 404 ($3,600 + $6,600).
b.
To record the direct labour costs for
Jobs 402 and 404 ($6,000 + $9,000).
c.
To allocate overhead costs to Jobs
402 and 404 at 210% of the direct
labour cost assigned to them.
10,200
15,000
31,500
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50
Fundamental Accounting Principles, Eleventh Canadian Edition
Problem 22-2A Part 1 (continued)
d.
31 Factory Overhead ...................................................
Raw Materials Inventory..................................
2,100
31 Factory Overhead ...................................................
Factory Payroll ................................................
3,000
To add the cost of indirect materials
to actual factory overhead.
e.
To add the cost of indirect labour to
actual factory overhead.
2,100
3,000
Part 2
Factory Overhead account:
Original ending balance...........................................
Applied to Jobs 402 and 404 ...................................
Additional indirect materials ....................................
Additional indirect labour .........................................
Underapplied overhead ...........................................
Dec.
31
$ 27,000
(31,500)
2,100
3,000
$ 600 (debit)
Cost of Goods Sold.................................................
Factory Overhead ...........................................
To remove the $600 of underapplied overhead
from the Factory Overhead account and
add it to the cost of goods sold for the year.
600
600
Part 3
MURRAY COMPANY
Trial Balance
December 31, 2004
Cash........................................................................
Accounts receivable ................................................
Raw materials inventory ..........................................
Goods in process inventory.....................................
Finished goods inventory ........................................
Prepaid rent.............................................................
Accounts payable ....................................................
Notes payable .........................................................
Common shares ......................................................
Retained earnings ...................................................
Sales .......................................................................
Cost of goods sold ..................................................
Factory payroll.........................................................
Factory overhead ....................................................
Miscellaneous expenses .........................................
Total ........................................................................
$ 48,000
42,000
11,700
56,700
9,000
3,000
105,600
– 0–
– 0–
45,000
$321,000
$ 10,500
13,500
30,000
87,000
180,000
$321,000
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Solutions Manual for Chapter 22
51
Problem 22-2A (concluded)
Part 4
MURRAY COMPANY
Income Statement
For Year Ended December 31, 2004
Sales..............................................................................................
Cost of goods sold .........................................................................
Gross profit ....................................................................................
Miscellaneous expenses................................................................
Net income ....................................................................................
$ 180,000
(105,600)
$ 74,400
(45,000)
$ 29,400
MURRAY COMPANY
Balance Sheet
As of December 31, 2004
Cash ..............................................................................................
Accounts receivable ......................................................................
Raw materials inventory ................................................................
Goods in process inventory ...........................................................
Finished goods inventory...............................................................
Prepaid rent ...................................................................................
Total assets ...................................................................................
$ 48,000
42,000
11,700
56,700
9,000
3,000
$170,400
Accounts payable ..........................................................................
Notes payable................................................................................
Total liabilities ................................................................................
Common shares ............................................................................
Retained earnings ($87,000 + $29,400) ........................................
Total shareholders’ equity...........................................................
Total liabilities and shareholders’ equity .....................................
$ 10,500
13,500
24,000
30,000
116,400
146,400
$170,400
Part 5
The $2,100 error would cause the costs for Job 404 to be understated. Because Job 404 is in
process at the end of the period, goods in process inventory and total assets would both be
understated on the balance sheet. In addition, overhead would be overapplied by $2,100 – $600 =
$1,500 instead of being underapplied by $600. Therefore, the entry to close the overhead account
would credit cost of goods sold for $1,500 instead of a debit for $600. The error would cause cost of
goods sold to be overstated, and both net income and retained earnings to be understated.
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52
Fundamental Accounting Principles, Eleventh Canadian Edition
Problem 22-3A
Part 1
a.
Raw Materials Inventory.........................................................
Accounts Payable...........................................................
100,000
b.
Factory Payroll .......................................................................
Cash ...............................................................................
84,000
c.
Factory Overhead ..................................................................
Cash ...............................................................................
11,000
d.
Goods in Process Inventory ...................................................
Factory Overhead ..................................................................
Raw Materials Inventory .................................................
80,000
12,000
Goods in Process Inventory ...................................................
Factory Overhead ..................................................................
Factory Payroll ...............................................................
68,000
16,000
Goods in Process Inventory ...................................................
Factory Overhead...........................................................
104,000
Finished Goods Inventory ......................................................
Goods in Process Inventory ...........................................
222,000
Accounts Receivable..............................................................
Sales ..............................................................................
240,000
Cost of Goods Sold ................................................................
Finished Goods Inventory...............................................
120,000
i.
Factory Overhead ..................................................................
Accumulated Amortization, Factory Building ..................
Accumulated Amortization, Factory Equipment ..............
Prepaid Insurance ..........................................................
Estimated Property Taxes Payable ................................
96,000
j.
Goods in Process Inventory ...................................................
Factory Overhead...........................................................
32,000
e.
f.
($8,000 + $18,000 + $26,000) × 200% = $104,000
g.
$44,000 + $76,000 + $102,000 = $222,000
h.
$44,000 + $76,000 = $120,000
($14,000 + $2,000) × 200% = $32,000
100,000
84,000
11,000
92,000
84,000
104,000
222,000
240,000
120,000
37,000
31,000
7,000
21,000
32,000
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Solutions Manual for Chapter 22
53
Problem 22-3A (continued)
Part 2
GENERAL LEDGER ACCOUNTS
Raw Materials Inventory
(a)
Bal.
100,000 (d)
Factory Payroll
92,000
8,000
(b)
Bal.
Goods in Process Inventory
(d)
80,000 (g)
(e)
84,000 (e)
84,000
0.00
Factory Overhead
222,000
(c)
11,000 (f)
104,000
68,000
(d)
12,000 (j)
32,000
(f)
104,000
(e)
16,000
(j)
32,000
(i)
96,000
Bal.
62,000
Bal.
Finished Goods Inventory
(g)
222,000 (h)
Bal.
102,000
1,000
Cost of Goods Sold
120,000
(h)
120,000
Bal.
120,000
Part 3
JOB COST SHEETS
Job No. 136
Materials
Labour
Overhead
Total cost
$20,000
8,000
16,000
$44,000
Job No. 137
Materials
Labour
Overhead
Total cost
$10,000
14,000
28,000
$52,000
Job No. 138
Materials
Labour
Overhead
Total cost
$22,000
18,000
36,000
$76,000
Job No. 139
Materials
Labour
Overhead
Total cost
$ 24,000
26,000
52,000
$102,000
Job No. 140
Materials
Labour
Overhead
Total cost
$ 4,000
2,000
4,000
$10,000
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54
Fundamental Accounting Principles, Eleventh Canadian Edition
Problem 22-3A (concluded)
Part 4
Goods in Process Inventory:
Job 137 .......................................................................
Job 140 .......................................................................
Balance .......................................................................
$ 52,000
10,000
$ 62,000
Finished Goods Inventory:
Job 139 ....................................................................... $ 102,000
Balance ....................................................................... $ 102,000
Cost of Goods Sold:
Job 136 .......................................................................
Job 138 .......................................................................
Balance .......................................................................
$ 44,000
76,000
$120,000
Problem 22-4A
Part 1
a.
Predetermined overhead application rate:
Estimated overhead costs
Estimated direct labour cost
b.
c.
=
$400,400
= 227.5%
5,500 × $32 = $176,000
Overhead costs charged to jobs:
Jobs
Direct
Labour
Applied
Overhead
(227.5%)
AW1-05 ($32 × 750 hours) ......................................
FL1-05 ($32 × 1,150 hours).....................................
PN1-05 ($32 × 2,100 hours)....................................
DR1-05 ($32 × 700 hours).......................................
CL1-05 ($32 × 850 hours) .......................................
Total ........................................................................
$ 24,000
36,800
67,200
22,400
27,200
$177,600
$ 54,600
83,720
152,880
50,960
61,880
$404,040
Over- or underapplied overhead:
Actual cost...................................................................
Less applied cost ........................................................
Overapplied overhead .................................................
$402,900
404,040
$ 1,140
Part 2
Dec.
31
Overhead ................................................................
Cost of goods sold .........................................
1,140
1,140
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Solutions Manual for Chapter 22
55
Problem 22-5A
a.
Raw Materials Inventory ($30,000 + $11,200)........................
Accounts Payable ...........................................................
41,200
41,200
b. & c.
JOB COST SHEET
Customer’ s Name
Direct Materials
Date
Requisition
Number
#35
#36
Total
Job No.
Grobe Company
Direct Labour
Amount
16,000.00
9,600.00
25,600.00
Time Ticket
Number
#1-10
Amount
40,000.00
102
Overhead Costs Applied
Date
May --
Rate
70%
Amount
28,000.00
SUMMARY OF COSTS
Total
40,000.00
Dir. Materials
Dir. Labour
Overhead
Total Cost
of the Job
25,600.00
40,000.00
28,000.00
93,600.00
JOB COST SHEET
Customer’ s Name
Direct Materials
Date
Requisition
Number
#37
#38
Job No.
Reynco Company
Amount
8,000.00
4,800.00
Direct Labour
Time Ticket
Number
#11-30
Amount
32,000.00
103
Overhead Costs Applied
Date
May --
Rate
70%
Amount
22,400.00
SUMMARY OF COSTS
Total
12,800.00
Total
32,000.00
Dir. Materials
Dir. Labour
Overhead
Total Cost
of the Job
12,000.00
32,000.00
22,400.00
67,000.00
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56
Fundamental Accounting Principles, Eleventh Canadian Edition
Problem 22-5A (continued)
RAW MATERIALS LEDGER CARD
Item
Material M
Received
Receiving
Unit
Date Report Units Price
May 1
#426
Total
Price
150 200.00 30,000
Issued
Requisition Units
#35
#37
80
40
Unit
Price
Total
Price
200.00 16,000
200.00 8,000
Balance
Units
Unit
Price
Total
Price
120
270
190
150
200.00
200.00
200.00
200.00
24,000
54,000
38,000
30,000
RAW MATERIALS LEDGER CARD
Item
Material R
Received
Receiving
Unit
Date Report Units Price
May 1
#427
70
Total
Price
160.00 11,200
Issued
Requisition Units
#36
#38
60
30
Unit
Price
160.00
160.00
Balance
Total
Price
Units
9,600
4,800
80
150
90
60
Unit
Price
Total
Price
160.00 12,800
160.00 24,000
160.00 14,400
160.00 9,600
RAW MATERIALS LEDGER CARD
Item
Paint
Received
Date
Receiving
Unit
Report Units Price
May 1
Total
Price
Issued
Requisition Units
#39
12
Unit
Price
72.00
Balance
Total
Price
Units
Unit
Price
Total
Price
864
44
32
72.00
72.00
3,168
2,304
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Solutions Manual for Chapter 22
57
Problem 22-5A (continued)
d.
Factory Payroll .......................................................................
Cash ...............................................................................
84,000
Factory Overhead...................................................................
Cash ...............................................................................
36,000
e.
Finished Goods Inventory.......................................................
Goods in Process Inventory............................................
93,600
f.
Accounts Receivable—Grobe Company ................................
Sales...............................................................................
290,000
g.
Cost of Goods Sold ................................................................
Finished Goods Inventory ...............................................
93,600
h.
Goods in Process Inventory ...................................................
Factory Overhead...................................................................
Raw Materials Inventory .................................................
38,400
864
Goods in Process Inventory ...................................................
Factory Overhead ...............................................................
Factory Payroll................................................................
72,000
12,000
Goods in Process Inventory ...................................................
Factory Overhead ...........................................................
50,400
$16,000 + $9,600 + $8,000 + $4,800 = $38,400
i.
$40,000 + $32,000 = $72,000
j.
$28,000 + $22,400 = $50,400
84,000
36,000
93,600
290,000
93,600
39,264
84,000
50,400
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58
Fundamental Accounting Principles, Eleventh Canadian Edition
Problem 22-5A (concluded)
GENERAL LEDGER
Cash
Goods in Process Inventory
(d)
84,000
(h)
38,400 (e)
(d)
36,000
(i)
72,000
(j)
50,400
Accounts Receivable
(f)
290,000
39,968 (h)
(a)
41,200
93,600
(f) 290,000
Finished Goods Inventory
(e)
Raw Materials Inventory
Bal.
Sales
93,600 (f)
93,600
Cost of Goods Sold
(f)
Accounts Payable
39,264
(a)
93,600
Factory Overhead
41,200
(d)
36,000 (j)
(h)
864
(i)
50,400
12,000
Factory Payroll
(d)
84,000 (i)
84,000
FACTORY OVERHEAD LEDGER
Indirect Materials
(b)
k.
864
Indirect Labour
(c)
12,000
Miscellaneous Overhead
(d)
36,000
Balance in Raw Materials Inventory = $41,904
Material M, $30,000
Material R, $9,600
Paint, $2,304
Balance in Goods in Process Inventory = $67,200
Materials, $12,800
Labour, $32,000
Overhead, $22,400
l.
Balance in Factory Overhead = $1,536 credit; overapplied.
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Solutions Manual for Chapter 22
59
Problem 22-6AA
Part 1
Adjusting entries:
Dec.
31
Factory Overhead—Amortization ............................
Accumulated Amortization, Factory Equipment
80,000
31
Direct Labour ..........................................................
Wages Payable ...............................................
24,500
31
Factory Overhead—Indirect Labour ........................
Wages Payable ...............................................
7,000
31
Income Taxes Expense...........................................
Income Taxes Payable ....................................
112,000
80,000
24,500
7,000
112,000
Part 2
Total overhead cost (as adjusted):
Indirect labour ($87,500 + $7,000)..............................
Factory utilities............................................................
Repairs, factory equipment.........................................
Amortization of factory equipment ..............................
Total overhead cost ....................................................
$ 94,500
67,500
15,000
80,000
$257,000
Total direct labour cost ($232,500 + $24,500) ............
$257,000
Ratio of overhead cost to direct labour cost ...............
100.0%
Part 3
Ending goods in process inventory:
Direct materials................................
Direct labour ....................................
Overhead (100% of labour) .............
Total ................................................
Ending finished goods inventory:
Direct materials................................
Direct labour ....................................
Overhead (100% of labour) .............
Total ................................................
Per Unit
$25.00
10.00
10.00
Per Unit
$42.00
22.50
22.50
Units
2,500
2,500
2,500
Units
6,000
6,000
6,000
Total
$ 62,500
25,000
25,000
$112,500
Total
$252,000
135,000
135,000
$522,000
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60
Fundamental Accounting Principles, Eleventh Canadian Edition
Problem 22-6AA (concluded)
Part 4
Closing entries:
Dec.
31
Manufacturing Summary.........................................
Raw Materials Inventory..................................
Goods in Process Inventory ............................
Raw Materials Purchases ...............................
Direct Labour ..................................................
Indirect Labour ................................................
Factory Utilities ...............................................
Repairs, Factory Equipment............................
Amortization of Factory Equipment .................
1,439,000
31
Raw Materials Inventory .........................................
Goods in Process Inventory....................................
Manufacturing Summary .................................
210,000
112,500
31
Income Summary....................................................
Manufacturing Summary .................................
Finished Goods Inventory ...............................
Selling Expenses ............................................
General and Administrative Expenses ............
Income Taxes Expense...................................
1,741,000
31
Finished Goods Inventory .......................................
Sales.......................................................................
Income Summary ............................................
522,000
1,562,500
Income Summary....................................................
Retained Earnings ..........................................
343,500
31
200,000
100,000
625,000
257,000
94,500
67,500
15,000
80,000
322,500
1,116,500
225,000
162,500
125,000
112,000
2,084,500
343,500
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Solutions Manual for Chapter 22
61
ALTERNATE PROBLEMS
Problem 22-1B
Part 1
Total for each manufacturing cost and each job:
614
615
From March:
Direct materials..............
Direct labour ..................
*Applied overhead .........
$ 700
900
450
$
For April:
Direct materials..............
Direct labour ..................
*Applied overhead .........
Total costs .....................
5,000
1,500
750
$9,300
8,500
2,800
1,400
$14,800
Total
for April
616
900
800
400
$ 4,000
6,000
3,000
$13,000
$17,500
10,300
5,150
*Equals 50% of the direct labour cost.
Part 2
Journal entries for April:
a. Raw Materials Inventory .........................................................
Accounts Payable ...........................................................
20,000
Factory Payroll .......................................................................
Cash ...............................................................................
11,000
Factory Overhead...................................................................
Raw Materials Inventory .................................................
1,500
Factory Overhead...................................................................
Factory Payroll................................................................
700
Factory Overhead...................................................................
Cash ...............................................................................
1,000
Factory Overhead...................................................................
Cash ...............................................................................
600
Factory Overhead...................................................................
Accumulated Amortization, Factory Equipment ..............
1,400
20,000
11,000
1,500
700
1,000
600
1,400
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62
Fundamental Accounting Principles, Eleventh Canadian Edition
Problem 22-1B Part 2 (continued)
b.
Goods in Process Inventory ...................................................
Raw Materials Inventory .................................................
17,500
Goods in Process Inventory ...................................................
Factory Payroll ...............................................................
10,300
Goods in Process Inventory ...................................................
Factory Overhead...........................................................
5,150
Finished Goods Inventory ......................................................
Goods in Process Inventory ...........................................
24,100
d.
Cost of Goods Sold ................................................................
Finished Goods Inventory...............................................
9,300
e.
Cash.......................................................................................
Sales ..............................................................................
19,000
f.
Factory Overhead ..................................................................
Cost of Goods Sold ........................................................
50
c.
$9,300 + $14,800 = $24,100
17,500
10,300
5,150
24,100
9,300
19,000
50
$1,500 + $700 + $1,000 + $600 + 1,400 – $5,150 = $50
Part 3
ALLIANCE COMPANY
Manufacturing Statement
For Month Ended April 30, 2004
Direct materials used...................................................
Direct labour used .......................................................
Factory overhead:
Indirect materials .....................................................
$1,500
Indirect labour..........................................................
700
Factory rent .............................................................
1,000
Factory utilities ........................................................
600
Amortization of equipment.......................................
1,400
Total manufacturing costs ...........................................
Add goods in process inventory,
March 31, 2002 (Jobs 614 & 615) ...........................
Total goods in process during the month ....................
Deduct goods in process inventory,
April 30, 2002 (Job 616) ..........................................
Cost of goods manufactured (Jobs 614 & 615) ...........
$17,500
10,300
5,200
33,000
4,150
37,150
(13,000)
$24,150
(Note: The cost of goods manufactured does not equal the sum of the costs of Jobs
614 and 615 because of the overapplied overhead.)
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Solutions Manual for Chapter 22
63
Problem 22-1B Part 3 (concluded)
On the income statement for the month ended April 30:
Sales...........................................................................
Cost of goods sold ($9,300 – $50) ............................
Gross profit .................................................................
$19,000
(9,250)
$ 9,750
On the April 30 balance sheet:
Inventories:
Raw materials .........................................................
Goods in process....................................................
Finished goods .......................................................
Total inventories .....................................................
$ 6,000*
13,000
14,800
$33,800
*Beginning raw materials inventory......................
Purchases ...........................................................
Direct materials used...........................................
Indirect materials used ........................................
Ending raw materials inventory ...........................
$
5,000
20,000
(17,500)
(1,500)
$ 6,000
Part 4
Factory overhead is underapplied by $50. This means that individual jobs or batches are slightly
undercosted. Therefore, profit analysis at the product level in total will also be understated.
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64
Fundamental Accounting Principles, Eleventh Canadian Edition
Problem 22-2B
Part 1
Dec.
31
Goods in Process Inventory....................................
Raw Materials Inventory..................................
13,000
Goods in Process Inventory....................................
Factory Payroll ................................................
18,000
Goods in Process Inventory....................................
Factory Overhead ...........................................
12,600
Factory Overhead ...................................................
Raw Materials Inventory..................................
700
Factory Overhead ...................................................
Factory Payroll ................................................
2,000
To record the direct materials costs for
Jobs 406 and 408 ($5,000 + $8,000).
31
To record the direct labour costs for
Jobs 406 and 408 ($6,000 + $12,000).
31
To allocate overhead costs to Jobs
406 and 408 at 70% of the direct
labour cost assigned to them.
31
To add the cost of indirect materials
to actual factory overhead.
31
To add the cost of indirect labour to
actual factory overhead.
13,000
18,000
12,600
700
2,000
Part 2
Factory Overhead account:
Original ending balance...........................................
Applied to Jobs 406 and 408 ...................................
Additional indirect materials ....................................
Additional indirect labour .........................................
Overapplied overhead .............................................
Dec.
31
$ 9,800
(12,600)
700
2,000
$ (100) (credit)
Factory Overhead ...................................................
Cost of Goods Sold .........................................
To remove the $100 of overapplied
overhead from the Factory Overhead
account and subtract it from the
cost of goods sold for the year.
100
100
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Solutions Manual for Chapter 22
65
Problem 22-2B (continued)
Part 3
ELROY COMPANY
Trial Balance
December 31, 2004
Cash ...........................................................................
Accounts receivable ...................................................
Raw materials inventory .............................................
Goods in process inventory ........................................
Finished goods ...........................................................
Prepaid rent ................................................................
Accounts payable .......................................................
Notes payable.............................................................
Common shares .........................................................
Retained earnings ......................................................
Sales...........................................................................
Cost of goods sold ......................................................
Factory payroll ............................................................
Factory overhead........................................................
Miscellaneous expenses.............................................
Total ...........................................................................
$ 30,000
90,000
10,300
43,600
50,000
4,000
139,900
– 0–
– 0–
22,000
$389,800
$ 16,000
30,000
60,000
33,800
250,000
$389,800
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66
Fundamental Accounting Principles, Eleventh Canadian Edition
Problem 22-2B (concluded)
Part 4
ELROY COMPANY
Income Statement
For Year Ended December 31, 2004
Sales ..............................................................................................
Cost of goods sold .........................................................................
Gross profit.....................................................................................
Miscellaneous expenses ................................................................
Net income .....................................................................................
$ 250,000
(139,900)
$ 110,100
(22,000)
$ 88,100
ELROY COMPANY
Balance Sheet
As of December 31, 2004
Cash...............................................................................................
Accounts receivable .......................................................................
Raw materials inventory .................................................................
Goods in process inventory............................................................
Finished goods inventory ...............................................................
Prepaid rent....................................................................................
Total assets....................................................................................
$ 30,000
90,000
10,300
43,600
50,000
4,000
$227,900
Accounts payable ...........................................................................
Notes payable ................................................................................
Total liabilities.................................................................................
Common shares .............................................................................
Retained earnings ($33,800 + $88,100) .........................................
Total shareholders’ equity ...........................................................
Total liabilities and shareholders’ equity ......................................
$ 16,000
30,000
$ 46,000
$ 60,000
121,900
$181,900
$227,900
Part 5
The $700 error would cause the costs for Job 408 to be understated. Because Job 408 is in
process at the end of the period, goods in process inventory and total assets would both be
understated on the balance sheet. In addition, overhead would be overapplied by $700 + $100 =
$800 instead of being overapplied by only $100. Therefore, the entry to close the overhead account
would credit cost of goods sold for $800 instead of a credit for $100. The error would cause cost of
goods sold to be overstated, and both net income and retained earnings to be understated.
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Solutions Manual for Chapter 22
67
Problem 22-3B
Part 1
a.
Raw Materials Inventory .........................................................
Accounts Payable ...........................................................
49,500
b.
Factory Payroll .......................................................................
Cash ...............................................................................
42,750
c.
Factory Overhead...................................................................
Cash ...............................................................................
6,750
d.
Goods in Process Inventory ...................................................
Factory Overhead...................................................................
Raw Materials Inventory .................................................
33,975
9,000
Goods in Process Inventory ...................................................
Factory Overhead...................................................................
Factory Payroll................................................................
31,500
11,250
Goods in Process Inventory ...................................................
Factory Overhead ...........................................................
51,300
Finished Goods Inventory.......................................................
Goods in Process Inventory............................................
104,400
Accounts Receivable ..............................................................
Sales...............................................................................
97,000
Cost of Goods Sold ................................................................
Finished Goods Inventory ...............................................
68,625
i.
Factory Overhead...................................................................
Accumulated Amortization, Factory Building...................
Accumulated Amortization, Factory Equipment ..............
Prepaid Insurance...........................................................
Estimated Property Taxes Payable.................................
35,450
j.
Goods in Process Inventory ...................................................
Factory Overhead ...........................................................
11,700
e.
f.
($8,550 + $9,000 + $8,100) × 200% = $51,300
g.
$34,650 + $35,775 + $33,975 = $104,400
h.
$34,650 + $33,975 = $68,625
49,500
42,750
6,750
42,975
42,750
51,300
104,400
97,000
68,625
13,500
15,050
2,700
4,200
11,700
($4,950 + $900) × 200% = $11,700
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68
Fundamental Accounting Principles, Eleventh Canadian Edition
Problem 22-3B (continued)
Part 2
GENERAL LEDGER ACCOUNTS
Raw Materials Inventory
(a)
49,500
Bal.
6,525
Factory Payroll
(d)
42,975
(b)
42,750
(e)
42,750
Bal.
0
Goods in Process Inventory
(d)
33,975
(g)
104,400
Factory Overhead
(e)
31,500
(c)
6,750
(f)
51,300
(f)
51,300
(d)
9,000
(j)
11,700
(j)
11,700
(e)
11,250
Bal.
24,075
(i)
35,450
Bal.
550
Finished Goods Inventory
(g)
104,400
Bal.
35,775
(h)
68,625
Part 3
Cost of Goods Sold
(h)
68,625
Bal.
68,625
JOB COST SHEETS
Job No. 45
Materials
Labour
Overhead
Total cost
$9,000
8,550
17,100
$34,650
Job No. 48
Materials
Labour
Overhead
Total cost
$ 9,675
8,100
16,200
$33,975
Job No. 46
Materials
Labour
Overhead
Total cost
$4,725
4,950
9,900
$19,575
Job No. 49
Materials
Labour
Overhead
Total cost
$1,800
900
1,800
$4,500
Job No. 47
Materials
Labour
Overhead
Total cost
$ 8,775
9,000
18,000
$35,775
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Solutions Manual for Chapter 22
69
Problem 22-3B (concluded)
Part 4
Goods in Process Inventory:
Job 46.........................................................................
Job 49.........................................................................
Balance.......................................................................
$19,575
4,500
$24,075
Finished Goods Inventory:
Job 47.........................................................................
Balance.......................................................................
$35,775
$35,775
Cost of Goods Sold:
Job 45.........................................................................
Job 48.........................................................................
Balance.......................................................................
$34,650
33,975
$68,625
Problem 22-4B
Part 1
a.
Predetermined overhead application rate:
Estimated overhead costs
=
Estimated direct labour cost
b.
$590,400
$210,000
= 281.14%
Overhead costs charged to jobs:
Jobs
Direct
Labour
CL-05-01.................................................................
CL-05-02.................................................................
CL-05-03.................................................................
CL-05-04.................................................................
CL-05-05.................................................................
Total .......................................................................
$32,200
40,600
58,800
19,600
51,800
$203,000
Applied
Overhead
(281.14%)
$ 90,527.08
114,142.84
165,310.32
55,103.44
145,630.52
$570,714.20
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70
Fundamental Accounting Principles, Eleventh Canadian Edition
Problem 22-4B Part 1 (concluded)
c.
Over- or underapplied overhead:
Actual cost...................................................................
Less applied cost ........................................................
Underapplied overhead ...............................................
$613,432.00
570,714.20
$ 42,717.80
Part 2
Dec.
31
Cost of Goods Sold.................................................
Overhead ........................................................
42,717.80
42,717.80
Problem 22-5B
JOB COST SHEET
Customer’ s Name
Ancira Company
Direct Materials
Job No.
Direct Labour
450
Overhead Costs Applied
Time
Ticket
Requisition
Date
Number
Amount
#223
2,400
#224
16,000
Number
#1-10
Amount
24,000
Date
Rate
Mar. ---
120%
Amount
28,800
SUMMARY OF COSTS
Dir. Materials.........
18,400
Dir. Labour ............
24,000
Overhead ..............
28,800
Total Cost of
the Job ..................
Total
18,400
Total
71,200
24,000
Finished
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Solutions Manual for Chapter 22
71
Problem 22-5B (continued)
RAW MATERIALS LEDGER CARD
Item
Material M
Received
Receiving
Date
Report
Issued
Unit
Total
Requi-
Units Price
Price
sition
Units
Balance
Unit
Total
Unit
Total
Price
Price Units Price
Price
Mar. 1
#20
150
40 6,000
150
40
6,000
300
40 12,000
#223
60
40 2,400
240
40
9,600
#225
30
40 1,200
150
40
8,400
RAW MATERIALS LEDGER CARD
Item
Material R
Received
Receiving
Date
Report
Issued
Unit
Total
Requi-
Units Price
Price
sition
Balance
Unit
Total
Unit
Total
Units Price
Price
Units Price
Price
Mar. 1
50
#21
200
160
32,000
160
8,000
250
160 40,000
#224
100
160 16,000
150
160 24,000
#226
75
160 12,000
75
160 12,000
RAW MATERIALS LEDGER CARD
Item
Paint
Received
Receiving
Date
Report
Issued
Unit
Total
Requi-
Units Price
Price
sition
Units
Balance
Unit
Total
Unit
Total
Price
Price Units Price
Price
Mar. 1
#227
10
20
200
20
20
400
10
20
200
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72
Fundamental Accounting Principles, Eleventh Canadian Edition
Problem 22-5B (continued)
a.
GENERAL JOURNAL
Raw Materials Inventory ...............................................
Accounts Payable...................................................
38,000
To record materials purchases
($6,000 + $32,000).
d.
Factory Payroll .............................................................
Cash .......................................................................
48,000
Factory Overhead.........................................................
Cash .......................................................................
47,000
Finished Goods Inventory.............................................
Goods in Process ...................................................
71,200
Accounts Receivable ....................................................
Sales ......................................................................
130,000
Cost of Goods Sold ......................................................
Finished Goods Inventory.......................................
71,200
Goods in Process Inventory .........................................
Factory Overhead.........................................................
Raw Materials Inventory .........................................
31,600
200
Goods in Process Inventory .........................................
Factory Overhead.........................................................
Factory Payroll .......................................................
44,000
4,000
Goods in Process Inventory .........................................
Factory Overhead...................................................
52,800
To record factory payroll.
To record other factory overhead.
e.
To record completion of jobs.
f.
To record sales on account.
To record cost of sales.
h.
To record direct & indirect materials
($2,400 + $1,200 + $16,000 + $12,000 + $200).
i.
To record direct & indirect labour
($24,000 + $20,000 + $4,000).
j.
To apply overhead ($28,800 + $24,000).
38,000
48,000
47,000
71,200
130,000
71,200
31,800
48,000
52,800
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Solutions Manual for Chapter 22
73
Problem 22-5B (concluded)
GENERAL LEDGER
Cash
Accounts Receivable
(d)
48,000
(d)
47,000
(f)
Sales
Cost of Goods Sold
(f)
130,000
(f)
Finished Goods Inventory
(e)
71,200 (f)
14,400 (h)
(a)
38,000
71,200
(a)
31,800
47,000 (j)
(h)
200
(i)
38,000
Goods in Process Inventory
(h)
31,600 (e)
(i)
44,000
(j)
52,800
Factory Overhead
(d)
71,200
Accounts Payable
Raw Materials Inventory
Bal.
130,000
71,200
Factory Payroll
52,800
(d)
48,000 (i)
48,000
4,000
FACTORY OVERHEAD LEDGER
Indirect Materials
(b)
200
Indirect Labour
(c)
4,000
Miscellaneous Overhead
(d)
47,000
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74
Fundamental Accounting Principles, Eleventh Canadian Edition
1.
Balance in Raw Materials Inventory = $20,600
Material M,
$ 8,400
Material R,
$12,000
Paint,
$ 200
2.
Balance in Goods in Process Inventory = $57,200
Materials,
$13,200
Labour,
$20,000
Overhead,
$24,000
3.
Balance in Factory Overhead = $1,600 credit; overapplied.
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Solutions Manual for Chapter 22
75
Problem 22-6BA
Part 1
Adjusting entries:
Dec.
31
Factory Overhead—Amortization ............................
Accumulated Amortization,
Factory Equipment.......................................
103,750
31
Direct Labour ..........................................................
Wages Payable ...............................................
22,750
31
Factory Overhead—Indirect Labour ........................
Wages Payable ...............................................
6,500
31
Income Taxes Expense...........................................
Income Taxes Payable ....................................
91,000
103,700
22,750
6,500
91,000
Part 2
Total overhead cost (as adjusted):
Indirect labour ($122,500 + $6,500)............................
Factory utilities............................................................
Repairs, factory equipment.........................................
Amortization of factory equipment ..............................
Total overhead cost ....................................................
$129,000
94,500
21,000
103,750
$348,250
Total direct labour cost ($325,500 + $22,750) ............
$348,250
Ratio of overhead cost to direct labour cost ...............
100.0%
Part 3
Ending goods in process inventory:
Direct materials................................
Direct labour ....................................
Overhead (100% of labour) .............
Total ................................................
Per Unit
$25.00
10.00
10.00
Units
2,500
2,500
2,500
Total
$ 62,500
25,000
25,000
$112,500
Per Unit
$30.00
32.50
32.50
Units
6,000
6,000
6,000
Total
$180,000
195,000
195,000
$570,000
Ending finished goods inventory:
Direct materials................................
Direct labour ....................................
Overhead (100% of labour) .............
Total ................................................
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76
Fundamental Accounting Principles, Eleventh Canadian Edition
Problem 22-6BA (concluded)
Part 4
Closing entries:
Dec.
31
Manufacturing Summary.........................................
Raw Materials Inventory..................................
Goods in Process Inventory ............................
Raw Materials Purchases ...............................
Direct Labour ..................................................
Indirect Labour ................................................
Factory Utilities ...............................................
Repairs, Factory Equipment............................
Amortization of Factory Equipment .................
2,102,250
31
Raw Materials Inventory .........................................
Goods in Process Inventory....................................
Manufacturing Summary .................................
294,000
112,500
31
Income Summary....................................................
Manufacturing Summary .................................
Finished Goods Inventory ...............................
Selling Expenses ............................................
General and Administrative Expenses ............
Income Taxes Expense...................................
2,504,250
31
Finished Goods Inventory .......................................
Sales.......................................................................
Income Summary ............................................
570,000
2,187,500
Income Summary....................................................
Retained Earnings ..........................................
253,250
31
420,000
140,000
875,000
325,500
122,500
94,500
21,000
103,750
406,500
1,695,750
315,000
227,500
175,000
91,000
2,757,500
253,250
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Solutions Manual for Chapter 22
77
ANALYTICAL & REVIEW PROBLEMS
A&R Problem 22-1 (30 minutes)
Direct materials used
Purchases
=
Beginning inventory + Purchases – End inventory –
Indirect materials
=
$81,690 + 92,456* – 73,920 – 4,810
=
$95,416
=
Accounts payable, ending + Cash payments –
Accounts payable, beginning
Direct labour
=
$67,984 + 50,960 – 26,488
=
$92,456*
=
Payroll – Indirect labour
=
$131,390 – 27,910
=
$103,480
Cost transferred to finished goods = Finished goods, ending + Cost of goods sold – Finished
goods, beginning
=
$56,000 + (694,400 – 596,400) – 42,000
=
$112,000
Overhead applied = Ending manufacturing overhead incurred – Beginning manufacturing overhead
incurred + Overapplied overhead
=
$249,900 – 203,840 + 2,450
=
$48,510
Work-in-process, end of May = Beginning balance + DM + DL + Overhead applied – Transfer to
finished goods
=
$118,139 + 95,416 + 103,480 + 48,510 – 112,000
=
$253,545
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78
Fundamental Accounting Principles, Eleventh Canadian Edition
A&R Problem 22-2 (40 minutes)
Part 1
Raw Materials Inventory
May 1
Bal.
30,000 (b)
(a)
48,000
35,000
Factory Payroll
(c)
Goods in Process Inventory
May 1
Bal.
10,000 (g)
(b)
25,000
(d)
50,000
(f)
62,500
100,000
Bal.
(g)
12,500 (h)
94,000
100,000
65,000
Cost of Goods Sold
(h)
Finished Goods Inventory
May 1
65,000 (d)
94,000
Factory Overhead
(e)
36,000 (f)
(b)
10,000
(d)
15,000
62,500
Supporting entries (optional):
a.
Raw Materials Inventory ..........................................................
Cash ................................................................................
48,000
Goods in Process Inventory ....................................................
Factory Overhead ...................................................................
Raw Materials Inventory ..................................................
25,000
10,000
Factory Payroll ........................................................................
Cash ................................................................................
65,000
Goods in Process Inventory ....................................................
Factory Overhead ...................................................................
Factory Payroll ................................................................
50,000
15,000
Derived from the debit to the Raw Materials Inventory
account.
b.
Derived from the debit to Goods in Process Inventory
and the credit to Raw Materials Inventory.
c.
Derived from the debit to Factory Payroll.
d.
Derived from the debit to Goods in Process Inventory
and the debit to Factory Payroll.
48,000
35,000
65,000
65,000
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Solutions Manual for Chapter 22
79
A&R Problem 22-2 Part 1 (continued)
e.
Factory Overhead ............................................................
Other Accounts ........................................................
36,000
f.
Goods in Process Inventory ............................................
Factory Overhead ....................................................
$50,000 × 125%
62,500
g.
Finished Goods Inventory ................................................
Goods in Process Inventory .....................................
100,000
Cost of Goods Sold .........................................................
Finished Goods Inventory ........................................
94,000
Derived from the debit to Factory Overhead and
additional information.
Derived from the credit to Goods in Process
Inventory.
h.
Derived from the credit to Finished Goods
Inventory.
36,000
62,500
100,000
94,000
Part 2
a.
b.
c.
d.
e.
May 31 finished goods .....................................................
Labour cost incurred during May .....................................
Cost of goods sold during May ........................................
Overhead incurred during May ........................................
Overhead charged to jobs during May .............................
$18,500
65,000
94,000
61,000
62,500
Part 3
Overhead was overapplied by $1,500, which is the difference between the $62,500 applied cost
and the $61,000 incurred cost.
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80
Fundamental Accounting Principles, Eleventh Canadian Edition
A&R Problem 22-3 (30 minutes)
a.
Raw Materials
Beginning inventory ............................................
Purchases ..........................................................
Available for use ................................................
Direct materials used (24,640 ÷ 1.12) ................
Indirect material used .........................................
Ending inventory ................................................
b.
24,800
$24,200
Work in Process
Beginning inventory ............................................
Direct labour (35,000 – 4,200) ..........................
Overhead applied (25,200 – 560) .....................
Direct materials (24,640 ÷ 1.12) .........................
Cost of goods manufactured ..............................
Ending inventory ................................................
c.
$22,000
2,800
$ 7,000
42,000
$49,000
$21,000
30,800
24,640
22,000
98,440
72,800
$25,640
Finished Goods
Beginning inventory ............................................
Cost of goods manufactured ..............................
Available for sale ................................................
Cost of goods sold [(1 – .35) 84,000].................
Ending inventory ................................................
$38,500
72,800
111,300
54,600
$56,700
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Solutions Manual for Chapter 22
81
A&R Problem 22-4
The problem with the adjusted trial balance for Porter Company lies in the balances for the Factory
Payroll and Factory Overhead accounts. If all information had been processed correctly, both of
these accounts would have zero balances.
Factory labour is recorded as a debit in the Factory Payroll account based on employee clock
cards. Employees also complete time tickets that allocate their labour to specific jobs and to
overhead. These time tickets are processed as credits to the Factory Payroll account. A $6,720
debit balance in the Factory Payroll account indicates that some time tickets for the period have not
yet been processed. A correcting entry is required that credits Factory Payroll and debits any direct
labour to Goods in Process Inventory, Finished Goods Inventory, and/or Cost of Goods Sold. Any
indirect labour should be debited to Factory Overhead.
Regarding factory overhead, actual overhead costs incurred are recorded in the Factory Overhead
account as debits and overhead is charged to jobs using a predetermined overhead rate. Overhead
applications are recorded in the Factory Overhead account as credits. At the end of the period, a
material balance in Factory Overhead is removed and allocated to Goods in Process Inventory,
Finished Goods Inventory, and Cost of Goods Sold. Or, if the amount is not material, it is charged
entirely to Cost of Goods Sold. A $3,360 debit balance in Factory Overhead indicates that overhead
has been underapplied. A correcting entry is required that credits Factory Overhead and debits the
accounts just described.
Note: The necessary payroll correction should be recorded before the Factory Overhead balance is
eliminated. Otherwise, any unrecorded indirect labour would not be accounted for in the factory
overhead correcting entry.
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Fundamental Accounting Principles, Eleventh Canadian Edition