Chapter 15
At the beginning of the year, a company estimates total overhead costs of $1,278,720. The company applies overhead using machine hours and estimates that it will use 2,960 machine hours during the year. What amount of overhead should be applied to a job that uses 25 machine hours that year?
$10,800 Overhead costs / estimated machine hours during the year * overhead applied to a job that uses 25 machine hours that year. $1,278,720 / 2,960 = 432 * 25 = $10,800
Manufacturing costs flow in which order?
Raw materials inventory, work in process inventory, finished goods inventory.
A job order costing system is used to determine the cost of producing each job or job lot. (T/F)
True
When a customized product is manufactured separately, it is referred to as ____ production:
a job order Examples of job order production include special order machines, a factory building, custom jewelry, tattoos, wedding invitations, and audits by an accounting firm. When more than one unit of a custom product is produced, it is called a job lot.
A company makes bikes from recycled metal. For a recent job lot of 200 bikes, the company incurred direct materials cost of $6,000 and direct labor costs of $2,000. Factory overhead applied to this job is $9,000. What is the total manufacturing cost of this job log?
$17,000 Manufacturing costs = direct materials + Direct Labor + Factory overhead applied to this job. $6,000 + $2,000 + $9,000 = $17,000
All of the following are included on a job cost sheet except?
Customer's signature when job is complete.
The total costs on job cost sheets for jobs that are not yet completed equals the balance in the Finished Goods Inventory account. (T/F)
False
Which of the following is NOT a feature of job order production?
High production volume
The balance in the Work in Process Inventory account at any point in time equals
The sum of the manufacturing costs for all jobs in process but not yet completed.
Job A3B was ordered by a customer on September 25. During the month of September, Jaycee Corporation used $2,500 of direct materials and used $4,000 of direct labor. The job was not finished in September. An additional #3,000 of direct materials and $6,500 of direct labor were needed to finish the job in October. The company applies overhead at the end of each month at a rate of 200% of the direct labor cost incurred. What is the total cost of the job when it is completed in October?
$37,000 Overhead = Direct labor x 200% Overhead + Direct materials + direct labor = cost. Then add September with October for total cost. September: ($4,000 x 2) + $2,500 + $4,000 = $14,500 October: ($6,500 x 2) + $3,000 + $6,500 = $22,500 $14,500 + $22,500 = $37,000
A company that uses job order costing reports the following information. Overhead is applied at the rate of 60% of direct materials. The company has no beginning Work in Process or Finished Goods inventories. Jobs 1 and 3 are not finished by the end of March, and Job 2 is finished but not sold by the end of March. Job 1: Direct materials used - $13,600 Direct labor used - $21,600 Job 2: Direct materials used - $17,600 Direct labor used - $11,600 Job 3: Direct materials used - $6,600 Direct labor used $9,600 Determine the total dollar amount of Work in Process inventory at the end of March.
$63,520 Overhead (direct materials used x 60%) + Direct materials used + direct labor used = Work in Process Inventory. Job 1: $13,600 x .6 = $8,160 + $13,600 + $21,600 = $43,360 Job 2: Finished goods are not included in Work in Process Inventory even if they are not yet sold. Job 3: $6,600 x .6 = $3,960 + $6,600 + $9,600 = $20,160 TOTAL Work in Process Inventory = total of Job 1 + Total of Job 2. $43,360 + $20,160 = $63,520
A company makes bikes from recycled metal. For a recent job lot of 200 bikes, the company incurred direct materials costs of $6,000 and direct labor costs of $2,000. Factory overhead applied to this job is $9,000. What is the cost per bike?
$85 Manufacturing costs equal direct materials + Direct Labor + Factory overhead applied to this job. $6,000 + $2,000 + $9,000 = $17,000/lot of bikes = cost per bike. $6,000 + $2,000 + $9,000 = $17,000 / 2 = $85
Job A3B was ordered by a customer on September 25. During the month of September, Jaycee Corporation used $3,400 of direct materials and used $4,900 of direct labor. The job was not finished in September. An additional $3,900 of direct materials and $8,300 of direct labor were needed to finish the job in October. The company applies overhead at the end of each month at a rate of 200% of the direct labor cost incurred. What is the balance in the Work in Process account at the end of September relative to Job A3B?
$18,100 Company applies overhead at a rate of 200% of the DIRECT LABOR cost incurred. We are looking at the account at the end of September. Overhead = Direct labor $4,900 * 2 (200%) = 9,800 Overhead + Direct Labor in September + Direct Materials in September 9,800 + 4,900 + 3,400 = 18,100
Job A3B was ordered by a customer on September 25. During the month of September, Jaycee Corporation used $2,500 of direct materials and used $4,000 of direct labor. The job was not finished in September. An additional $3,000 of direct materials and $6,500 of direct labor were needed to finish the job in October. The company applies overhead at the end of each month at a rate of 200% of the direct labor cost. What is the amount of job costs added to the Work in Process inventory during October?
$22,500 Company applies overhead at a rate of 200% of the DIRECT LABOR cost incurred. We are looking at the account during October. Overhead = Direct Labor $6,500 * 2 (200%) = $13,000 Overhead + Direct Labor in October + Direct Materials in October = job costs added to Work in Process Inventory during October. $13,000 + $6,500 + $3,000 = $22,500
A job cost sheet includes:
Direct material, direct labor, and applied overhead.
A company that uses a cost accounting system normally has only two inventory accounts: Finished Goods Inventory and Work in Process Inventory. (T/F)
False
A company that uses job order costing purchases $1000,000 in raw materials for cash. The journal entry to record this transaction consists of a debit to Cash for $100,000 and a credit to work in Process Inventory for $100,000.
False
There are two basic types of cost accounting systems: job order costing and custom order costing. (T/F)
False
Three manufacturing costs include:
direct materials, direct labor, overhead Direct materials are goods used in manufacturing that are clearly identified with a particular job. Direct labor is the effort devoted to a particular job. Indirect materials and indirect labor are added to the overhead costs. Other overhead costs support production of more than one job. Overhead costs include depreciation, indirect materials, supervision and maintenance (indirect labor), factory cleaning, and factory utilities.
