Job Order Costing

Question: Would the following companies most likely use a job order costing system or a process costing system?

1. Paint manufacturer

2. Print shop

3. Caterer

4. Soft drink bottler

5. Yacht builder

Question: Record the following journal entries for Smith Company:

6. Purchased raw materials on account, \(10,000.

7. Used \)6,000 in direct materials and \(500 in indirect materials in production.

8. Incurred \)8,000 in labor costs, of which 80% was direct labor.

Question: Smith Company expected to incur \(10,000 in manufacturing overhead costs and use 4,000 machine hours for the year. Actual manufacturing overhead was \)9,700, and the company used 4,250 machine hours.

9. Calculate the predetermined overhead allocation rate using machine hours as the allocation base.

10. How much manufacturing overhead was allocated during the year?

Question: The following information pertains to Smith Company, which you worked with previously in this chapter:

11. Smith Company completed jobs that cost \(25,000 to manufacture. Record the journal entry.

12. Smith Company sold jobs to customers on account for \)52,000 that cost $22,000 to manufacture. Record the journal entries.

Question: The following information pertains to Smith Company for the year:

13. Calculate the predetermined overhead allocation rate using direct labor hours as the allocation base.

14. Determine the amount of overhead allocated during the year. Record the journal entry.

15. Determine the amount of underallocated or overallocated overhead. Record the journal entry to adjust Manufacturing

Overhead.

Question: Wesson Company is a consulting firm. The firm expects to have \(45,000 in indirect costs during the year and bill customers for 6,000 hours. The cost of direct labor is \)75 per hour.

16. Calculate the predetermined overhead allocation rate for Wesson using estimated billable hours for the allocation base.

17. Wesson completed a consulting job for George Peterson and billed the customer for 15 hours. What was the total cost of the consulting job?

18. If Wesson wants to earn a profit equal to 60% of the cost of a job, how much should the company charge Mr. Peterson?

Question: Why do managers need to know the cost of their products?

Question: What types of companies use job order costing systems?

Question: What is the purpose of a job cost record?

Question: Give the journal entry for raw materials purchased on account. Explain how this transaction affects the accounting equation.

Question: What is the purpose of the raw materials subsidiary ledger? How is it related to the general ledger?

Question: How does the use of direct and indirect materials in production affect the accounts?

Question: What types of companies use process costing systems?

Give the journal entry for direct and indirect labor costs incurred. Explain how this transaction affects the accounting equation.

Give five examples of manufacturing overhead costs. Why are they consideredindirect costs?

What is the predetermined overhead allocation rate?

What is an allocation base? Give some examples

Question: How is manufacturing overhead allocated to jobs?

Question: A completed job cost record shows the unit cost of the products. How is this calculated?

Question: Explain the journal entry for the allocation of overhead. What accounts are affected? Are they increased or decreased?

Distinguishing between job order costing and process costing

Would the following companies most likely use job order costing or process costing?

a. A manufacturer of refrigerators

Distinguishing between job order costing and process costing

Would the following companies most likely use job order costing or process costing?

b. A manufacturer of specialtywakeboards

Distinguishing between job order costing and process costing

Would the following companies most likely use job order costing or process costing?

c. A manufacturer of luxury yachts

Distinguishing between job order costing and process costing

Would the following companies most likely use job order costing or process costing?

d. A professional service firm

Distinguishing between job order costing and process costing

Would the following companies most likely use job order costing or process costing?

e. A landscape contractor

Distinguishing between job order costing and process costing

Would the following companies most likely use job order costing or process costing?

f. A custom home builder

Distinguishing between job order costing and process costing

Would the following companies most likely use job order costing or process costing?

g. A cell phone manufacturer      

Distinguishing between job order costing and process costing

Would the following companies most likely use job order costing or process costing?

h. A manufacturer of frozen pizza

Distinguishing between job order costing and process costing

Would the following companies most likely use job order costing or process costing?

i. A manufacturer of multivitamins

Distinguishing between job order costing and process costing

Would the following companies most likely use job order costing or process costing?

j. A manufacturer of tennis shoes

Question: Give the journal entry for the completion of a job. How is the accounting equation affected?

Question: Explain the difference between cost of goods manufactured and cost of goods sold.

Question: A job was started on May 15, completed on June 27, and delivered to the customer on July 6. In which accounts would the costs be recorded on the financial statements dated May 31, June 30, and July 31?

How is the predetermined overhead allocation rate used by service companies?

Why would the manager of a service company need to use job order costing?

Explain the terms accumulate, assign, allocate, and adjust as they apply to job order costing.

Refer to the previous question. Give the journal entry to adjust the Manufacturing Overhead account for overallocated or underallocated overhead.

If a company incurred \(5,250 in actual overhead costs and allocated \)5,575 to jobs, was the overhead overallocated or underallocated? By how much?

Question: Why does the sale of a completed job require two journal entries? What are they?

Question: Explain the difference between underallocated overhead and overallocated overhead. What causes each situation?

Back Country manufactures backpacks. Its plant records include the following materials-related data

Journalize the entries to record the transactions, post to the Raw Materials Inventory account, and determine the ending balance in Raw Materials Inventory.

Analyze the following T-accounts to determine the amount of direct and indirectmaterials used.

Raw material inventory

Work in process inventory

Journalize the following labor-related transactions for Portland Glass Creations at its plant in Portland, Oregon. Assume that the labor has been incurred, but not yet paid.

Oak Outdoor Furniture manufactures wood patio furniture. If the company reportsthe following costs for June 2018, what is the balance in the Manufacturing Overheadaccount before overhead is allocated to jobs? Assume that the labor has been incurred,but not yet paid. Prepare journal entries for overhead costs incurred in June.

Job 303 includes direct materials costs of \(550 and direct labor costs of \)400. If the predetermined overhead allocation rate is 40% of direct labor cost, what is the total cost assigned to Job 303?

Rosco Company estimates the company will incur $80,750 in overhead costs and 4,750 direct labor hours during the year. Actual direct labor hours were 4,600. Calculate the predetermined overhead allocation rate using direct labor hours as the allocation base, and prepare the journal entry for the allocation of overhead.

Lincoln Company completed jobs that cost \(38,000 to produce. In the same period,the company sold jobs for \)88,000 that cost $42,000 to produce. Prepare the journalentries for the completion and sales of the jobs. All sales are on account.

Comparing actual to allocated overhead

Columbus Enterprises reports the following information at December 31, 2018:

Manufacturing overhead

Requirements

1. What is the actual manufacturing overhead of Columbus Enterprises? 

Comparing actual to allocated overhead

Columbus Enterprises reports the following information at December 31, 2018:

                                           Manufacturing overhead

Requirements

2. What is the allocated manufacturing overhead?

Comparing actual to allocated overhead

Columbus Enterprises reports the following information at December 31, 2018:

                                             Manufacturing overhead

Requirements

3. Is manufacturing overhead underallocated or overallocated? By how much?