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Chapter 4

Job Costing
Part 2

The Work-in-Process Inventory account of a


manufacturing firm has a balance of $2,400
at the end of an accounting period. The job
cost sheets of two uncompleted jobs show
charges of $400 and $200 for materials used,
and charges of $300 and $500 for direct
labor used. Overhead is applied as a
percentage of direct labor costs. The
predetermined rate is:

A. 41.7%
B. 80.0%
C. 125.0%
D. 240.0%

The Work-in-Process Inventory account of a manufacturing firm has a


balance of $2,400 at the end of an accounting period. The job cost sheets
of two uncompleted jobs show charges of $400 and $200 for materials
used, and charges of $300 and $500 for direct labor used. Overhead is
applied as a percentage of direct labor costs. The predetermined rate is
A. 41.7%.
B. 80.0%.
C.125.0%.
D. 240.0%.
Overhead = $2,400 - (400 + 200) - (300 + 500) = $1,000; Overhead rate
= $1,000/(300 + 500) = 125.0%

Job 450 requires $9,800 of direct materials,


$6,400 of direct labor, 590 direct labor
hours, and 400 machine hours.
Manufacturing overhead is computed at
$14 per direct labor hour used and $10 per
machine hour used.
The total cost of Job 450 is:

A. $12,260.
B. $28,460.
C. $16,200.
D. $24,460.

Job 450 requires $9,800 of direct materials, $6,400 of


direct labor, 590 direct labor hours, and 400 machine
hours. Manufacturing overhead is computed at $14
per direct labor hour used and $10 per machine hour
used.
The total cost of Job 450 is
A) $12,260.
B) $28,460.
C) $16,200.
D) $24,460.
Answer: B
Explanation: B) $ 9,800 + 6,400 + ($14 590 ) + ($10
400 ) = $ 28,460
.

The predetermined overhead rate for


manufacturing overhead for 2008 is $4.00 per
direct labor hour. Employees are expected to
earn $5.00 per hour and the company is planning
on paying its employees $100,000 during the
year. However, only 75% of the employees are
classified as "direct labor." What was the
estimated manufacturing overhead for 2008?

A. $75,000
B. $60,000
C. $80,000
D. $93,750

The predetermined overhead rate for manufacturing


overhead for 2008 is $4.00 per direct labor hour.
Employees are expected to earn $5.00 per hour and the
company is planning on paying its employees $100,000
during the year. However, only 75% of the employees are
classified as "direct labor." What was the estimated
manufacturing overhead for 2008?
A. $60,000
B. $75,000
C. $80,000
D. $93,750
($100,000 .75)/$5.00 = 15,000 hours; 15,000 $4.00 =
$60,000

Scottso Corporation applies overhead using a


normal costing approach based upon machinehours. Budgeted factory overhead was
$232,750, budgeted machine-hours were
17,500. Actual factory overhead was $227,830,
actual machine-hours were 16,150. How much
is the over- or under-applied overhead?

A. $4,920 underapplied
B. $4,920 overapplied
C. $13,035 underapplied
D. $13,035 overapplied

Scottso Corporation applies overhead using a


normal costing approach based upon machinehours. Budgeted factory overhead was
$232,750, budgeted machine-hours were
17,500. Actual factory overhead was $227,830,
actual machine-hours were 16,150. How much
is the over- or underapplied overhead?
A.$13,035 overapplied
B.$13,035 underapplied
C.$4,920 overapplied
D.$4,920 underapplied
$227,830 - [($232,750/17,500) 16,150] =
13,035 underapplied

Under Pick Co.'s job order costing system,


manufacturing overhead is applied to work in
process using a predetermined annual overhead
rate. During January, Pick's transactions included
the following:

Pick had neither beginning nor ending inventory in


Work-in-Process Inventory. What was the cost of
jobs completed in January?

A. $302,000
B. $310,000
C. $322,000
D. $330,000

Under Pick Co.'s job order costing system manufacturing


overhead is applied to work in process using a predetermined
annual overhead rate.
During January, Pick's transactions included the following:

Pick had neither beginning nor ending inventory in Work-inProcess Inventory.


What was the cost of jobs completed in January?
A. $302,000
B.$310,000
C. $322,000
D. $330,000
DM (90,000) + OH applied (113,000) + DL (107,000) =
$310,000

Job 590 has an ending balance of


$28,500. It has been charged
manufacturing overhead costs of $7,000.
The rate is 70% of direct labor. What was
the amount of direct materials charged to
the job?

A. $21,500
B. $11,500
C. $26,400
D. $19,950

Job 590 has an ending balance of $28,500. It has been charged


manufacturing overhead costs of $7,000. The rate is 70% of
direct labor. What was the amount of direct materials charged
to the job?
A) $21,500
B) $11,500
C) $26,400
D) $19,950
Answer: B
Explanation: B) 70% (X) = $7,000
X = $10,000 Then $ 28,500 - 7,000 - 10,000 = $ 11,500

Sykes Company has sales revenue of $585,000.


Cost of goods sold before adjustment is
$335,000. The company's actual manufacturing
overhead is $91,000, while allocated
manufacturing overhead is $104,400. What is
the actual (Adjusted) gross profit?

A. $159,000
B. $236,600
C. $250,000
D. $263,400

Sykes Company has sales revenue of $585,000. Cost of


goods sold before adjustment is $335,000. The
company's actual manufacturing overhead is $91,000,
while allocated manufacturing overhead is $104,400.
What is the actual gross profit?
Unadjusted Gross Profit: 585,000 335,000 = 250,000
Over Applied OH: 104,400 91,000 = 13,400
Adjusted Gross Profit: 250,000 + 13,400 = 263,400

Before prorating the manufacturing overhead costs at the


end of 2008, the Cost of Goods Sold and Finished Goods
Inventory had applied overhead costs of $57,500 and
$20,000 in them, respectively. There was no Work-in-Process
at the beginning or end of 2008. During the year,
manufacturing overhead costs of $74,000 were actually
incurred. The balance in the Applied Manufacturing Overhead
was $77,500 at the end of 2008. If the under or over-applied
overhead is prorated between Cost of Goods Sold and the
inventory accounts, how much will be allocated to the
Finished Goods Inventory?

A. $1,283
B. $1,217
C. $903
D. $2,597

Before prorating the manufacturing overhead costs at the end of 2008,


the Cost of Goods Sold and Finished Goods Inventory had applied
overhead costs of $57,500 and $20,000 in them, respectively. There
was no Work-in-Process at the beginning or end of 2008. During the
year, manufacturing overhead costs of $74,000 were actually incurred.
The balance in the Applied Manufacturing Overhead was $77,500 at
the end of 2008. If the under or overapplied overhead is prorated
between Cost of Goods Sold and the inventory accounts, how much
will be allocated to the Finished Goods Inventory?
A.$903
B. $1,217
C. $1,283
D. $2,597
$77,500 - 74,000 = $3,500 overapplied overhead; [$20,000/(57,500 +
20,000)] $3,500 = $903

Daguio Corporation uses direct labor-hours in its


predetermined overhead rate. At the beginning
of the year, the total estimated manufacturing
overhead was $224,580. At the end of the year,
actual direct labor-hours for the year were
18,200 hours, manufacturing overhead for the
year was under-applied by $12,100, and the
actual manufacturing overhead was $219,580.
The predetermined overhead rate for the year
must have been closest to:
A. $12.34 per machine-hour
B. $12.06 per machine-hour
C. $11.40 per machine-hour
D. $10.53 per machine-hour

Daguio Corporation uses direct labor-hours in its predetermined


overhead rate. At the beginning of the year, the total estimated
manufacturing overhead was $224,580. At the end of the year, actual
direct labor-hours for the year were 18,200 hours, manufacturing
overhead for the year was underapplied by $12,100, and the actual
manufacturing overhead was $219,580. The predetermined overhead
rate for the year must have been closest to:
Manufacturing overhead applied = Actual overhead - Underapplied
overhead
= $219,580 - $12,100
= $207,480
Predetermined overhead rate = Estimated total manufacturing
overhead Estimated total amount of the allocation base = $207,480
18,200 direct labor-hours = $11.40 per direct labor-hour