ch. 15

Fjord Company uses a job order costing system. In the last month, they used $24,600 of direct labor and $4,300 of indirect labor. How are these costs recorded?

Debit WIP Inventory 24,600 Debit FOH 4,300 Credit Wages Payable 28,900

PJ's Jeremy Corporation estimated factory overhead costs for the year to be $500,000. Jeremy also estimated its cost driver, machine hours, to be 10,000 for the year. On January 31, Job 24 was completed. It required 5 machine hours, $500 in direct materials and $700 in direct labor. What is the cost of Job #24?

FOH $500,000/10,000 MH = $50/MH DM 500 + DL 700 + Applied FOH (5x50) 250 = 1450

If a company applies overhead to production with a predetermined overhead rate, a credit balance in the Factory Overhead account at the end of the period means that the overhead was underapplied for the period. T/F

False

The cost of goods manufactured is recorded with a debit to the Work-in-Process Inventory account and a credit to the Finished Goods account. T/F

False

Which of the following will be debited to the Factory Overhead account of a widget manufacturer?

factory electricity costs

Evaluate the following statements: 1. KMPG (an accounting firm) would likely use a job order costing system in accounting for a client's tax preparation. 2. Kellogg's would likely use a job order costing system in accounting for production of Frosted Flakes. 3. A construction company would likely use a process costing system in accounting for building a museum.

1

The entry to record the purchase of raw materials on account would include a ________. 1. debit to the Raw Materials Inventory account 2. debit to the Work-in-Process Inventory account 3. credit to the Accounts Receivable account

1

On June 30, Caroline, Inc. finished Job 750 with total job costs of $4,800 and transferred the costs to Finished Goods Inventory. On July 6, Caroline sold goods from Job 750 to a customer for $8,000 cash. Assuming the perpetual inventory system is used, the journal entry to record this sale will include: 1. A debit to Cost of Goods Sold for $4,800 2. A debit to Cash for $8,000 3. A credit to Finished Goods Inventory for $8,000

1 & 2

The entry to record the usage of indirect materials in production would include a ________. 1. a debit to the Factory Overhead account 2. a debit to the Work-in-Process Inventory account 3. a credit to the Raw Materials Inventory account

1 & 3

Lucky Ducks uses a predetermined overhead rate to apply FOH to production based on machine hours. At the beginning of the year FOH was estimated to be $100,000 and machine hours to be 20,000. During the year they had the following FOH costs: Indirect Materials 13,000 Indirect Labor 70,000 Factory Depreciation 8,000 Factory Utilities 15,000 Actual machine hours used during the year were 19,000. How much was FOH over and/or underapplied?

11,000 1. preFOH rate = $100,000/20,000 MH= $5/MH 2. appFOH= $5/MHx19,000 MH = $95,000 3. Actual FOH (106000) - Applied FOH (95000) = UNDERapplied FOH 11,000

Vaughan Company applies FOH based on Direct Labor dollars. At the beginning of the year FOH was estimated to be $1,000,000 and DL$ to be $250,000. During the year they worked on many jobs. One job in particular, Job #58, had the following data: Direct materials cost $4,000 Direct labor cost $1,000 Direct labor hours 50 hours Evaluate the following statements: 1. The total cost of Job #58 is $8,000 2. The amount of FOH applied to this job is $4,000 3. When the job was transferred to Finished Goods, the Finished Goods Inventory account was credited

2

Morris Company applies factory overhead based on direct labor costs. For the current year, Morris Company estimated total factory overhead costs to be $400,000, and direct labor costs to be $2,000,000. Actual overhead costs for the year totaled $380,000, and actual direct labor costs totaled $1,800,000. At year-end, the balance in the Factory Overhead account is a ________ _________ balance.

20,000 debit

On January 1, Orebic, Inc.'s Work-in-Process Inventory account had a balance of $30,000. During the year, $58,000 of direct materials was placed into production. Factory wages incurred amounted to $80,000, of which $60,000 were for direct labor. Factory overhead is allocated on the basis of 140% of direct labor cost. Actual factory overhead was $90,000. Jobs costing $210,000 were completed during the year. What is the December 31 balance of Work-in-Process Inventory?

22,000

At the beginning of the year, Hard as a Rock Mattress Company had the following balances: WIP Inv. Debit 2000 FG Inv. Debit 8000 FOH Debit 0 CGS Debit 0 Sales Rev. Credit 0 The following additional details are provided for the year: Direct materials used $85,000 Direct labor used 191,000 Actual factory overhead 200,000 Applied factory overhead 180,000 Cost of jobs completed & transferred 400,000 Cost of Goods Sold (before any adjustment) 230,000 After recording all these transactions and adjusting for the over/underallocated overhead, the ending balance in the Cost of Goods Sold account is a $________ debit.

250,000 Debit: Actual 200,000 Credit: Applied 180,000 20,000 Under CGS D: 20,000 FOH C: 20,000 CGS Debit: 230,000 (under foh) 20,000 250,000

Evaluate the following statements: 1. When direct materials are requisitioned for a job, the Raw Materials Inventory account is debited. 2. The journal entry to issue indirect materials to production should include a debit to the Work in Process 3. When a job is completed, the total cost of the job is recorded with a debit to Finished Goods Inventory and a credit to Work-in-Process Inventory.

3

The job order cost sheets used by Svalbard Company revealed the following: Job. No. Bal., May 1 May Production Costs 134 $1,700 $0 135 $1,200 $300 136 $0 $900 Job No. 135 was completed during May and Jobs No. 134 and 135 were shipped to customers in May. What was the company's cost of goods sold for May?

3200 134 (1700+0) 135 (1200+300) total CGS: 3200

On August 1, Westvaco Mead Paper Company had beginning balances as shown in the T-accounts below. RM Inv. Debit 10,000 WIP Inv. Debit 20,000 FG Inv Debit 25,000 FOH Debit40,000 During August, the following transactions took place: August 22: Requisitioned $2,800 of direct materials and $500 of indirect materials to production. August 24: Incurred $6,600 of direct factory labor and $15,000 of indirect factory labor. What was the balance in the Factory Overhead account following these transactions?

55,500 FOH BB 40,000 IM 500 IL 15,000 End FOH 55,500

The accounts of Ellie Dreams, Inc. showed the following balances at the beginning of October: Account Debit Raw Materials Inventory $30,000 Work-in-Process Inventory 40,000 Finished Goods Inventory 50,000 Factory Overhead 20,000 During the month, direct materials amounting to $24,000 and indirect materials amounting to $4,000 were issued to production. What is the ending balance in the Work-in-Process Inventory account following these transactions?

64,000 debit WIP credit RM when use IM debit foh credit RM bb 40,000 debit dm 24,000

Vaughan Company applies FOH based on Direct Labor dollars. At the beginning of the year FOH was estimated to be $1,000,000 and DL$ to be $500,000. During the year they worked on many jobs. One job in particular, Job #58, had the following data: Direct materials cost $4,000 Direct labor cost $1,000 Direct labor hours 50 hours When the job was finished and transferred to Finished Goods, Vaughan debited Finished Goods for $__________.

7000 FOH/DL = $2 per DL$ DM used + DL used + Applied FOH 4000 1000 2000 7000 FG Inv. Debit 7000 WIP Inv. Credit 7000

The job order cost sheets used by Svalbard Company revealed the following: Job. No. Bal., May 1 May Production Costs 134 $1,700 $0 135 $1,200 $300 136 $0 $900 Job No. 135 was completed during May and Jobs No. 134 and 135 were shipped to customers in May. What was the company's balance of Work in Process inventory on May 31?

900

Evaluate the following statements: 1. Job order costing would be appropriate for companies that produce pencils 2. The total costs on job cost sheets for jobs that are not yet completed equals the balance in the Finished Goods Inventory account. 3. Job cost sheets are used to track all of the costs assigned to a job, including direct materials, direct labor, overhead, and all selling and administrative costs.

All False

Lucky Ducks uses a predetermined overhead rate to apply FOH to production based on machine hours. At the beginning of the year FOH was estimated to be $100,000 and machine hours to be 20,000. During the year they had the following FOH costs: Indirect Materials 13,000 Indirect Labor 77,000 Factory Depreciation 8,000 Factory Utilities 15,000 Actual machine hours used during the year were 21,000. Evaluate the following statements: 1. $106,000 of FOH was applied to production 2. FOH is $7,000 overapplied this year 3. The journal entry to close out FOH at the end of the year, CGS will be credited.

All False

Nenad Manufacturing began business on January 1. During its first year of operation, Nenad worked on five industrial jobs and reported the following information at year-end: Job 1 Job 2 Job 3 Job 4 Job 5 Direct Materials $1,000 $7,500 $4,000 $3,500 $1,800 Direct Labor 12,000 20,000 13,000 12,000 900 Applied FOH 1,500 6,000 2,500 7,500 200 Job completed: Jun 30 Sep 1 Oct 15 Nov 1 Not completed Job sold: Jul 10 Sep 12 Not sold Not sold N/A Revenues: $25,000 $39,000 N/A N/A N/A What was the balance in Work-In-Process Inventory at year-end?

DM+DL-Ap. FOH 2,900

On January 1, Vaughan, Inc.'s Work-in-Process Inventory account had a balance of $30,000. During the year, $50,000 of direct materials was used in production. Factory wages incurred amounted to $84,000, of which $60,000 were for direct labor. Factory overhead is applied on the basis of 120% of direct labor cost (dollars). Actual factory overhead was $90,000. Jobs costing $200,000 were completed during the year. The December 31 balance of Work-in-Process Inventory is ____________?

Beginning WIP + DM + DL + Ap. FOH (1.2*60,000) - 200,000 = Ending WIP $12,000

The job order cost sheets used by Svalbard Company revealed the following: Job. No. Bal., May 1 May Production Costs 134 $1,700 $0 135 $1,200 $300 136 $0 $900 Job No. 135 was completed during May and Jobs No. 134 and 135 were shipped to customers in May. What was the company's cost of goods sold for May?

Cost of 134 (1700+0) + 135 (1200+300) = 3,200

In a job order costing system, a credit to Finished Goods Inventory will be accompanied by a debit to

Cost of Goods Sold

Nenad Manufacturing began business on January 1. During its first year of operation, Nenad worked on five industrial jobs and reported the following information at year-end: Job 1 Job 2 Job 3 Job 4 Job 5 Direct Materials $1,000 $7,500 $4,000 $3,500 $1,800 Direct Labor 12,000 20,000 13,000 12,000 900 Applied FOH 1,500 6,000 2,500 7,500 200 Job completed: Jun 30 Sep 1 Oct 15 Nov 1 Not completed Job sold: Jul 10 Sep 12 Not sold Not sold N/A Revenues: $25,000 $39,000 N/A N/A N/A What was the balance in Cost of Goods Sold at year-end?

DM (1000+7500) + DL (12000+20000) - Applied FOH (1500+6000) = 48,000

In a job order costing system, any immaterial underapplied overhead at the end of the period can be debited entirely to Cost of Goods Sold. T/F

T

On April 30, Dolly, Inc. finished Job #750 with total job costs of $5,000 and transferred the costs to Finished Goods Inventory. On May 20, Dolly sold goods from Job #750 to a customer for $5,600 cash. Assume the perpetual inventory system is used. The entry Dolly will make at the sale will look like: account debit credit Cost of Goods Sold 5,000 Finished Goods Inventory 5,000 Cash 5,600 Sales 5,600 T/F

T

Predetermined overhead rates are calculated before the start of the accounting period, and are therefore based on estimates. T/F

T

Morten Enterprises reports the following information at December 31: Factory Overhead Debit: 4,300 21,000 18,500 Credit: 45,500 Morten Enterprises' FOH is $1,700 overapplied at the end of the year. T/F

True

Evaluate the following statements: 1. The costs transferred from Work-in-Process Inventory to Finished Goods Inventory are called Cost of Goods Manufactured. 2. Factory overhead costs are allocated to the Work-in-Process Inventory account by a debit to the Factory Overhead account. 3. A cost driver is the primary factor that causes a cost to be incurred. Only 2 of the above statements are TRUE. T/F

True 1 & 3 are True

The Prosperous Production Company applies factory overhead based on direct labor hours (DLH's) and they had the following accounting data for the year: Total FOH estimated at the beginning of the year $150,000 Total DLH's estimated at the beginning of the year 5,000 DLH's Actual FOH for the year $125,000 Actual DLH's 4,000 DLH's The predetermined FOH rate set at the beginning of the year is $30 per DLH T/F At the end of the year, FOH is under/over applied by how _______ The journal entry needed to zero out the FOH account at the end of the year will include a debit to Cost of Goods Sold. T/F

True Under 5000 True