TESU Finance End of Chapter Exercises and Problems

Apino Direct Labor Costs
785
rivity base
production
direct labor employees $8.500.
e activity
BRIEF EXERCISE 17.7
1015
the company’s financial statements?
Apiving Direct Materials
costs
Assume that all purchases are made on account.
a tale
2017-5
ually
BRIEF EXERCISE 17.8
Recording Manufacturing
Needles Manufacturing pays its direct labor employees $20 per hour. During the current period,
500 direct labor hours were recorded on employee time cards, and the company actually paid its
a. Record the summary journal entry to apply direct labor costs to all jobs during the period.
b. Prepare the summary journal entry to record direct labor wages paid during the period.
What is the balance of the Direct Labor account at the end of the period? How is it reported in
Norton Industries purchased direct materials costing $900.000 during the current period. It actu-
ally used only $825,000 of direct materials on jobs during the period.
Prepare the summary journal entry to record direct materials purchased during the period.
b. Prepare the summary journal entry to record all direct materials used during the period.
For each of the accounts listed, prepare two summary journal entries. In the first entry, illustrate a
transaction that would cause the account to be debited. In the second entry, illustrate a transaction
that would cause the account to be credited. Assume that perpetual inventory records are main-
tained. Include a brief written explanation with each journal entry and use XXX in place of dollar
amounts.
a.
Materials Inventory.
b.
Direct Labor.
C.
Manufacturing Overhead.
d. Finished Goods Inventory.
dur-
Costs
iod
of
2017-6
BRIEF EXERCISE 17.9
Selecting Activity Bases
Listed are the eight activity cost pools used by Charvez Corporation.
Production set-up costs
Maintenance costs
Heating costs
Design and engineering costs
Machinery power costs
Materials warehouse costs
Purchasing department costs Product inspection costs
Suggest an appropriate activity base for allocating each of the activity cost pools to products. (Con-
sider each cost pool independently.)
2017-6
BRIEF EXERCISE 17.10
Allocations in an ABC
System
a.
Danato, Inc., applies manufacturing overhead to production using an activity-based costing sys-
tem. The company’s utilities cost pool has accumulated $180,000, its maintenance cost pool has
accumulated $240,000, and its set-up cost pool has accumulated $60,000. The company has two
product lines, Deluxe and Basic. The utilities cost pool is allocated to these product lines on the
basis of machine-hours. The maintenance pool is allocated on the basis of work orders. The set-up
pool is allocated on the basis of production runs.
Allocate the utilities cost pool to each product line assuming the Deluxe model used 6.400
machine-hours and the Basic model used 1,600 machine-hours.
b.
Allocate the maintenance pool to each product line assuming the Deluxe model required 50
work orders and the Basic model required 150 work orders.
Allocate the set-up pool to each product line assuming the Deluxe model required 30 produc-
tion runs and the Basic model required 70 production runs.
C.
a connect
Exercises
L017-1, LO17-2, LO17-3,
L017-4, LO17-6, L017-7
EXERCISE 17.1
Accounting Terminology
Listed are seven technical accounting terms introduced or emphasized in this chapter.
Job order costing
Cost driver
Overhead application rate Cost of finished goods manufactured
Overapplied overhead Job cost sheet
Activity-based costing
Chapter 17 Job Order Cost Systems and Overhead Allocations
786
any of the terms.
in computing an overhead application rate.
Each of the following statements may (or may not describe these technical terms. For each stale
ment, indicate the term described, or answer “None” if the statement does not correctly describe
An activity base that can be traced directly to units produced and can be used as a denominas
b. The total of all direct labor, direct materials, and manufacturing overhead transferred from
A means of assigning indirect product costs to work in process during the period.
d.
The type of cost accounting system likely to be used by a construction company.
A debit balance remaining in the Manufacturing Overhead account at the end of the period.
e.
work in process to finished goods.
f. The type of cost accounting method likely to be used for overhead costs.
The information below was taken from the job cost sheets of Bates Company.
1, LO17-2, LO17-3,
4. LO17-5
CISE 17.2
f Costs in Job Order
Manufacturing
Costs as of
June 30
Job
Number
Manufacturing
Costs in July
101
102
$5,500
4,400
800
3,400
103
104
$3,000
6,000
7,000
1,900
105
106
a.
During July, jobs no. 103 and 104 were completed, and jobs no. 101, 102, and 104 were delivered to cy
tomers. Jobs no. 105 and 106 are still in process at July 31. From this information, compute the followi
The work in process inventory at June 30.
b. The finished goods inventory at June 30.
The cost of goods sold during July.
d. The work in process inventory at July 31.
The finished goods inventory at July 31.
C.
e.
2, L017-3,
5
King Tool is a machine shop that uses job order costing. Overhead is applied to individua
a predetermined rate based on direct labor costs. The following is a job cost sheet for job
Prepare general journal entries to:
7.3
es in Job Order
JOB COST SHEET
May
JOB NUMBER:
321
DATE STARTED
Ma
PRODUCT:
2″ Brass Check Valves
DATE COMPLETED
UNITS COMPLETED: 5,000
Apino Direct Labor Costs
785
rivity base
production
direct labor employees $8.500.
e activity
BRIEF EXERCISE 17.7
1015
the company’s financial statements?
Apiving Direct Materials
costs
Assume that all purchases are made on account.
a tale
2017-5
ually
BRIEF EXERCISE 17.8
Recording Manufacturing
Needles Manufacturing pays its direct labor employees $20 per hour. During the current period,
500 direct labor hours were recorded on employee time cards, and the company actually paid its
a. Record the summary journal entry to apply direct labor costs to all jobs during the period.
b. Prepare the summary journal entry to record direct labor wages paid during the period.
What is the balance of the Direct Labor account at the end of the period? How is it reported in
Norton Industries purchased direct materials costing $900.000 during the current period. It actu-
ally used only $825,000 of direct materials on jobs during the period.
Prepare the summary journal entry to record direct materials purchased during the period.
b. Prepare the summary journal entry to record all direct materials used during the period.
For each of the accounts listed, prepare two summary journal entries. In the first entry, illustrate a
transaction that would cause the account to be debited. In the second entry, illustrate a transaction
that would cause the account to be credited. Assume that perpetual inventory records are main-
tained. Include a brief written explanation with each journal entry and use XXX in place of dollar
amounts.
a.
Materials Inventory.
b.
Direct Labor.
C.
Manufacturing Overhead.
d. Finished Goods Inventory.
dur-
Costs
iod
of
2017-6
BRIEF EXERCISE 17.9
Selecting Activity Bases
Listed are the eight activity cost pools used by Charvez Corporation.
Production set-up costs
Maintenance costs
Heating costs
Design and engineering costs
Machinery power costs
Materials warehouse costs
Purchasing department costs Product inspection costs
Suggest an appropriate activity base for allocating each of the activity cost pools to products. (Con-
sider each cost pool independently.)
2017-6
BRIEF EXERCISE 17.10
Allocations in an ABC
System
a.
Danato, Inc., applies manufacturing overhead to production using an activity-based costing sys-
tem. The company’s utilities cost pool has accumulated $180,000, its maintenance cost pool has
accumulated $240,000, and its set-up cost pool has accumulated $60,000. The company has two
product lines, Deluxe and Basic. The utilities cost pool is allocated to these product lines on the
basis of machine-hours. The maintenance pool is allocated on the basis of work orders. The set-up
pool is allocated on the basis of production runs.
Allocate the utilities cost pool to each product line assuming the Deluxe model used 6.400
machine-hours and the Basic model used 1,600 machine-hours.
b.
Allocate the maintenance pool to each product line assuming the Deluxe model required 50
work orders and the Basic model required 150 work orders.
Allocate the set-up pool to each product line assuming the Deluxe model required 30 produc-
tion runs and the Basic model required 70 production runs.
C.
a connect
Exercises
L017-1, LO17-2, LO17-3,
L017-4, LO17-6, L017-7
EXERCISE 17.1
Accounting Terminology
Listed are seven technical accounting terms introduced or emphasized in this chapter.
Job order costing
Cost driver
Overhead application rate Cost of finished goods manufactured
Overapplied overhead Job cost sheet
Activity-based costing
Chapter 17 Job Order Cost Systems and Overhead Allocations
786
any of the terms.
in computing an overhead application rate.
Each of the following statements may (or may not describe these technical terms. For each stale
ment, indicate the term described, or answer “None” if the statement does not correctly describe
An activity base that can be traced directly to units produced and can be used as a denominas
b. The total of all direct labor, direct materials, and manufacturing overhead transferred from
A means of assigning indirect product costs to work in process during the period.
d.
The type of cost accounting system likely to be used by a construction company.
A debit balance remaining in the Manufacturing Overhead account at the end of the period.
e.
work in process to finished goods.
f. The type of cost accounting method likely to be used for overhead costs.
The information below was taken from the job cost sheets of Bates Company.
1, LO17-2, LO17-3,
4. LO17-5
CISE 17.2
f Costs in Job Order
Manufacturing
Costs as of
June 30
Job
Number
Manufacturing
Costs in July
101
102
$5,500
4,400
800
3,400
103
104
$3,000
6,000
7,000
1,900
105
106
a.
During July, jobs no. 103 and 104 were completed, and jobs no. 101, 102, and 104 were delivered to cy
tomers. Jobs no. 105 and 106 are still in process at July 31. From this information, compute the followi
The work in process inventory at June 30.
b. The finished goods inventory at June 30.
The cost of goods sold during July.
d. The work in process inventory at July 31.
The finished goods inventory at July 31.
C.
e.
2, L017-3,
5
King Tool is a machine shop that uses job order costing. Overhead is applied to individua
a predetermined rate based on direct labor costs. The following is a job cost sheet for job
Prepare general journal entries to:
7.3
es in Job Order
JOB COST SHEET
May
JOB NUMBER:
321
DATE STARTED
Ma
PRODUCT:
2″ Brass Check Valves
DATE COMPLETED
UNITS COMPLETED: 5,000
Exercises
any of the terms.
in computing an overhead application rate.
LO17-3, LO
EXERCIS
overhead
Determin
Unit Cos
C.
ing statements may (or may not describe these technical terms. Por each
ment, indicate the term described, or answer “None” if the statement does not correctly describe
An activity base that can be traced directly to units produced and can be used as a denominate
b. The total of all direct labor, direct materials, and manufacturing overhead transferred from
d. A debit balance remaining in the Manufacturing Overhead account at the end of the period
work in process to finished goods.
A means of assigning indirect product costs to work in process during the period.
e. The type of cost accounting system likely to be used by a construction
f. The type of cost accounting method likely to be used for overhead costs.
The information below was taken from the job cost sheets of Bates Company.
Manufacturing
Job
Costs as of
Number
June 30
company
LO17-1, LO17-2, LO17-3,
LO17-4, LO17-5
EXERCISE 17.2
Flow of Costs in Job Order
Costing
Manufacturing
Costs in July
101
102
103
104
105
106
$5,500
4,400
800
3,400
$3,000
6,000
7,000
1,900
LO17
ΕΧΕΙ
Cost
a.
tomers. Jobs no. 105 and 106 are still in process at July 31. From this information, compute the role
During July, jobs no. 103 and 104 were completed, and jobs no. 101, 102, and 104 were delivered to cu
C.
The work in process inventory at June 30.
b. The finished goods inventory at June 30.
The cost of goods sold during July.
d. The work in process inventory at July 31.
The finished goods inventory at July 31.
e.
LO17-1, LO17-2, LO17-3,
LO17-4, LO17-5
EXERCISE 17.3
Journal Entries in Job Order
Costing
Prepare general journal entries to:
King Tool is a machine shop that uses job order costing. Overhead is applied to individual cosa
a predetermined rate based on direct labor costs. The following is a job cost sheet for job no. 32
JOB COST SHEET
JOB NUMBER:
321
DATE STARTED:
May 10
PRODUCT: 2” Brass Check Valves
DATE COMPLETED:
May 21
UNITS COMPLETED:
5,000
$ 8,000
Direct materials used
Direct labor
Manufacturing overhead applied
Total cost of job no. 321
2,600
9,400
$20,000
Unit cost ($20,000 = 5,000 units)
$4
a.
Summarize the manufacturing costs charged to job no. 321. (Use one compound entry.
b. Record the completion of job no. 321.
Record the credit sale of 4,000 units from job no. 321 at a unit sales price of $10. Record in
separate entry the related cost of goods sold.
c.
787
st Drivers:
and Use of
During June, Assembly Department no. 4 of Hot Tech produced 17,500 model 201 computer
keyboards. Assembly of these units required 1.875 hours of direct labor at a cost of $50.000,
direct materials costing $120,000, and 400 hours of machine time. Based on an analysis of
overhead costs at the beginning of the year, overhead is applied to keyboards using the following
formula.
a.
b.
C.
Overhead = 120% of Direct Labor Cost + $300 per Machine Hour
Compute the total amount of overhead cost applied to the 17,500 keyboards.
Compute the per-unit cost of manufacturing these keyboards.
Briefly explain why the department might use two separate activity bases in applying overhead
costs to one type of product.
d. Identify at least two types of overhead cost pools that might be driven by each of the two cost
drivers indicated in this situation.
What appears to be the primary driver of overhead costs in the manufacture of keyboards?
f. Compute the gross profit that will result from the sale of 6,000 of these keyboards at a sales
price of $30 each.
e.
Identify whether each of the following costs of Granite Construction, Inc., would be classified
as direct labor, direct materials, manufacturing overhead, or as selling, general, and administrative
costs.
S
a.
C.
Hourly wages paid to backhoe operators.
b. Crankcase oil used in construction machinery.
PVC pipes used in a municipal sewer construction project.
d. Depreciation of bulldozers and other construction equipment.
e. Advertising costs.
f. Steel beams used in the construction of an office building.
g. Salaries paid to foremen responsible for supervising multiple construction projects.
h. Legal costs.
i. Gasoline used in trucks that haul construction equipment to various job sites.
j. Hourly wages paid to masons and carpenters.
k. Costs for accounting and tax services.
1. The CEO’s salary.
m. Rivets, screws, nuts, and bolts.
Tyge Corporation recorded the following activities during its first month of operations
Le costing $300,000.
WIP
Job Order Costing:
Computations and Journal
Entries
Debits to account:
Balance, June 1
Direct materials
Direct labor.
Manufacturing overhead (applied to jobs as 125% of direct labor cost)
Total debits to account
Credits to account:
Transferred to Finished Goods Inventory aacount
Balance, June 30
BIN
129
ASS
been charged to these jobs as of June 30.
Prepare general journal entries to summarize:
tion during June.
account.
LO17-1, LO17-2, LO17-3,
LO17-4, LO 17-5
PROBLEM 17.2A
Job Order Costing: Journal
Entries and Cost Flows
Instructions
compute the amount of manufacturing overhead and the amount of direct materials
Assuming that the direct labor charged to the jobs still in process at June 30 amounts to
b.
1. The manufacturing costs (direct materials, direct labor, and overhead) charged to probe
2. The transfer of production completed during June to the Finished Goods Investor
of $50,000. Show the related cost of goods sold in a separate journal entry.
3. The cash sale of 80 percent of the merchandise completed during June at a total sales
during the month of March. The company uses job order costing.
The following information relates to the manufacturing operations of O’Shaughnessy Mig,
a.
on account.)
Purchases of direct materials during the month amount to $59,700. (All purchases were made
b. Materials requisitions issued by the Production Department during the month total $56.00
total direct labor cost of $30,000.
Time cards of direct workers show 2,000 hours worked on various jobs during the month,
Direct workers were paid $26,300 in March.
d.
e.
Actual overhead costs for the month amount to $34,900 (for simplicity, you may credit
Accounts Payable).
Overhead is applied to jobs at a rate of $18 per direct labor hour.
f.
Jobs with total accumulated costs of $116,000 were completed during the month.
8.
h. During March, units costing $128,000 were sold for $210,000. (All sales were made on
account.)
C.
Instructions
Prepare general journal entries to summarize each of these transactions in the company’s general.
ledger accounts.
17-1, L017-2, L017-3,
17-4, LO17-5
OBLEM 17.3A
Order Costing: A
prehensive Problem
Georgia Woods, Inc., manufactures furniture to customers’ specifications and uses job order cu
ing. A predetermined overhead rate is used in applying manufacturing overhead to individuali
In Department One, overhead is applied on the basis of machine-hours, and in Department Tw
the basis of direct labor hours. At the beginning of the current year, management made the fi
ing budget estimates to assist in determining the overhead application rate.
Apino Direct Labor Costs
785
rivity base
production
direct labor employees $8.500.
e activity
BRIEF EXERCISE 17.7
1015
the company’s financial statements?
Apiving Direct Materials
costs
Assume that all purchases are made on account.
a tale
2017-5
ually
BRIEF EXERCISE 17.8
Recording Manufacturing
Needles Manufacturing pays its direct labor employees $20 per hour. During the current period,
500 direct labor hours were recorded on employee time cards, and the company actually paid its
a. Record the summary journal entry to apply direct labor costs to all jobs during the period.
b. Prepare the summary journal entry to record direct labor wages paid during the period.
What is the balance of the Direct Labor account at the end of the period? How is it reported in
Norton Industries purchased direct materials costing $900.000 during the current period. It actu-
ally used only $825,000 of direct materials on jobs during the period.
Prepare the summary journal entry to record direct materials purchased during the period.
b. Prepare the summary journal entry to record all direct materials used during the period.
For each of the accounts listed, prepare two summary journal entries. In the first entry, illustrate a
transaction that would cause the account to be debited. In the second entry, illustrate a transaction
that would cause the account to be credited. Assume that perpetual inventory records are main-
tained. Include a brief written explanation with each journal entry and use XXX in place of dollar
amounts.
a.
Materials Inventory.
b.
Direct Labor.
C.
Manufacturing Overhead.
d. Finished Goods Inventory.
dur-
Costs
iod
of
2017-6
BRIEF EXERCISE 17.9
Selecting Activity Bases
Listed are the eight activity cost pools used by Charvez Corporation.
Production set-up costs
Maintenance costs
Heating costs
Design and engineering costs
Machinery power costs
Materials warehouse costs
Purchasing department costs Product inspection costs
Suggest an appropriate activity base for allocating each of the activity cost pools to products. (Con-
sider each cost pool independently.)
2017-6
BRIEF EXERCISE 17.10
Allocations in an ABC
System
a.
Danato, Inc., applies manufacturing overhead to production using an activity-based costing sys-
tem. The company’s utilities cost pool has accumulated $180,000, its maintenance cost pool has
accumulated $240,000, and its set-up cost pool has accumulated $60,000. The company has two
product lines, Deluxe and Basic. The utilities cost pool is allocated to these product lines on the
basis of machine-hours. The maintenance pool is allocated on the basis of work orders. The set-up
pool is allocated on the basis of production runs.
Allocate the utilities cost pool to each product line assuming the Deluxe model used 6.400
machine-hours and the Basic model used 1,600 machine-hours.
b.
Allocate the maintenance pool to each product line assuming the Deluxe model required 50
work orders and the Basic model required 150 work orders.
Allocate the set-up pool to each product line assuming the Deluxe model required 30 produc-
tion runs and the Basic model required 70 production runs.
C.
a connect
Exercises
L017-1, LO17-2, LO17-3,
L017-4, LO17-6, L017-7
EXERCISE 17.1
Accounting Terminology
Listed are seven technical accounting terms introduced or emphasized in this chapter.
Job order costing
Cost driver
Overhead application rate Cost of finished goods manufactured
Overapplied overhead Job cost sheet
Activity-based costing
Chapter 17 Job Order Cost Systems and Overhead Allocations
786
any of the terms.
in computing an overhead application rate.
Each of the following statements may (or may not describe these technical terms. For each stale
ment, indicate the term described, or answer “None” if the statement does not correctly describe
An activity base that can be traced directly to units produced and can be used as a denominas
b. The total of all direct labor, direct materials, and manufacturing overhead transferred from
A means of assigning indirect product costs to work in process during the period.
d.
The type of cost accounting system likely to be used by a construction company.
A debit balance remaining in the Manufacturing Overhead account at the end of the period.
e.
work in process to finished goods.
f. The type of cost accounting method likely to be used for overhead costs.
The information below was taken from the job cost sheets of Bates Company.
1, LO17-2, LO17-3,
4. LO17-5
CISE 17.2
f Costs in Job Order
Manufacturing
Costs as of
June 30
Job
Number
Manufacturing
Costs in July
101
102
$5,500
4,400
800
3,400
103
104
$3,000
6,000
7,000
1,900
105
106
a.
During July, jobs no. 103 and 104 were completed, and jobs no. 101, 102, and 104 were delivered to cy
tomers. Jobs no. 105 and 106 are still in process at July 31. From this information, compute the followi
The work in process inventory at June 30.
b. The finished goods inventory at June 30.
The cost of goods sold during July.
d. The work in process inventory at July 31.
The finished goods inventory at July 31.
C.
e.
2, L017-3,
5
King Tool is a machine shop that uses job order costing. Overhead is applied to individua
a predetermined rate based on direct labor costs. The following is a job cost sheet for job
Prepare general journal entries to:
7.3
es in Job Order
JOB COST SHEET
May
JOB NUMBER:
321
DATE STARTED
Ma
PRODUCT:
2″ Brass Check Valves
DATE COMPLETED
UNITS COMPLETED: 5,000
Exercises
any of the terms.
in computing an overhead application rate.
LO17-3, LO
EXERCIS
overhead
Determin
Unit Cos
C.
ing statements may (or may not describe these technical terms. Por each
ment, indicate the term described, or answer “None” if the statement does not correctly describe
An activity base that can be traced directly to units produced and can be used as a denominate
b. The total of all direct labor, direct materials, and manufacturing overhead transferred from
d. A debit balance remaining in the Manufacturing Overhead account at the end of the period
work in process to finished goods.
A means of assigning indirect product costs to work in process during the period.
e. The type of cost accounting system likely to be used by a construction
f. The type of cost accounting method likely to be used for overhead costs.
The information below was taken from the job cost sheets of Bates Company.
Manufacturing
Job
Costs as of
Number
June 30
company
LO17-1, LO17-2, LO17-3,
LO17-4, LO17-5
EXERCISE 17.2
Flow of Costs in Job Order
Costing
Manufacturing
Costs in July
101
102
103
104
105
106
$5,500
4,400
800
3,400
$3,000
6,000
7,000
1,900
LO17
ΕΧΕΙ
Cost
a.
tomers. Jobs no. 105 and 106 are still in process at July 31. From this information, compute the role
During July, jobs no. 103 and 104 were completed, and jobs no. 101, 102, and 104 were delivered to cu
C.
The work in process inventory at June 30.
b. The finished goods inventory at June 30.
The cost of goods sold during July.
d. The work in process inventory at July 31.
The finished goods inventory at July 31.
e.
LO17-1, LO17-2, LO17-3,
LO17-4, LO17-5
EXERCISE 17.3
Journal Entries in Job Order
Costing
Prepare general journal entries to:
King Tool is a machine shop that uses job order costing. Overhead is applied to individual cosa
a predetermined rate based on direct labor costs. The following is a job cost sheet for job no. 32
JOB COST SHEET
JOB NUMBER:
321
DATE STARTED:
May 10
PRODUCT: 2” Brass Check Valves
DATE COMPLETED:
May 21
UNITS COMPLETED:
5,000
$ 8,000
Direct materials used
Direct labor
Manufacturing overhead applied
Total cost of job no. 321
2,600
9,400
$20,000
Unit cost ($20,000 = 5,000 units)
$4
a.
Summarize the manufacturing costs charged to job no. 321. (Use one compound entry.
b. Record the completion of job no. 321.
Record the credit sale of 4,000 units from job no. 321 at a unit sales price of $10. Record in
separate entry the related cost of goods sold.
c.
787
st Drivers:
and Use of
During June, Assembly Department no. 4 of Hot Tech produced 17,500 model 201 computer
keyboards. Assembly of these units required 1.875 hours of direct labor at a cost of $50.000,
direct materials costing $120,000, and 400 hours of machine time. Based on an analysis of
overhead costs at the beginning of the year, overhead is applied to keyboards using the following
formula.
a.
b.
C.
Overhead = 120% of Direct Labor Cost + $300 per Machine Hour
Compute the total amount of overhead cost applied to the 17,500 keyboards.
Compute the per-unit cost of manufacturing these keyboards.
Briefly explain why the department might use two separate activity bases in applying overhead
costs to one type of product.
d. Identify at least two types of overhead cost pools that might be driven by each of the two cost
drivers indicated in this situation.
What appears to be the primary driver of overhead costs in the manufacture of keyboards?
f. Compute the gross profit that will result from the sale of 6,000 of these keyboards at a sales
price of $30 each.
e.
Identify whether each of the following costs of Granite Construction, Inc., would be classified
as direct labor, direct materials, manufacturing overhead, or as selling, general, and administrative
costs.
S
a.
C.
Hourly wages paid to backhoe operators.
b. Crankcase oil used in construction machinery.
PVC pipes used in a municipal sewer construction project.
d. Depreciation of bulldozers and other construction equipment.
e. Advertising costs.
f. Steel beams used in the construction of an office building.
g. Salaries paid to foremen responsible for supervising multiple construction projects.
h. Legal costs.
i. Gasoline used in trucks that haul construction equipment to various job sites.
j. Hourly wages paid to masons and carpenters.
k. Costs for accounting and tax services.
1. The CEO’s salary.
m. Rivets, screws, nuts, and bolts.
Tyge Corporation recorded the following activities during its first month of operations
Le costing $300,000.
WIP
Job Order Costing:
Computations and Journal
Entries
Debits to account:
Balance, June 1
Direct materials
Direct labor.
Manufacturing overhead (applied to jobs as 125% of direct labor cost)
Total debits to account
Credits to account:
Transferred to Finished Goods Inventory aacount
Balance, June 30
BIN
129
ASS
been charged to these jobs as of June 30.
Prepare general journal entries to summarize:
tion during June.
account.
LO17-1, LO17-2, LO17-3,
LO17-4, LO 17-5
PROBLEM 17.2A
Job Order Costing: Journal
Entries and Cost Flows
Instructions
compute the amount of manufacturing overhead and the amount of direct materials
Assuming that the direct labor charged to the jobs still in process at June 30 amounts to
b.
1. The manufacturing costs (direct materials, direct labor, and overhead) charged to probe
2. The transfer of production completed during June to the Finished Goods Investor
of $50,000. Show the related cost of goods sold in a separate journal entry.
3. The cash sale of 80 percent of the merchandise completed during June at a total sales
during the month of March. The company uses job order costing.
The following information relates to the manufacturing operations of O’Shaughnessy Mig,
a.
on account.)
Purchases of direct materials during the month amount to $59,700. (All purchases were made
b. Materials requisitions issued by the Production Department during the month total $56.00
total direct labor cost of $30,000.
Time cards of direct workers show 2,000 hours worked on various jobs during the month,
Direct workers were paid $26,300 in March.
d.
e.
Actual overhead costs for the month amount to $34,900 (for simplicity, you may credit
Accounts Payable).
Overhead is applied to jobs at a rate of $18 per direct labor hour.
f.
Jobs with total accumulated costs of $116,000 were completed during the month.
8.
h. During March, units costing $128,000 were sold for $210,000. (All sales were made on
account.)
C.
Instructions
Prepare general journal entries to summarize each of these transactions in the company’s general.
ledger accounts.
17-1, L017-2, L017-3,
17-4, LO17-5
OBLEM 17.3A
Order Costing: A
prehensive Problem
Georgia Woods, Inc., manufactures furniture to customers’ specifications and uses job order cu
ing. A predetermined overhead rate is used in applying manufacturing overhead to individuali
In Department One, overhead is applied on the basis of machine-hours, and in Department Tw
the basis of direct labor hours. At the beginning of the current year, management made the fi
ing budget estimates to assist in determining the overhead application rate.
System
sion costs?
12. In a process costing system, what condition
in order for accountants to combine direct Valx*
facturing overhead costs and treat them simply
5. What are the four significant parts of the production cost
report for process costing?
6. Taylor & Malone is a law firm. Would the concepts of job
overhead referred to as a conversion cost?
order or process costing be more appropriate for this type of 13. Why is the combination of direct labor and to
7. Briefly explain the operation of process costing, including 14. Why might the unit cost of those items starte
the manner in which the unit costs of finished goods are
completed and transferred during the
determined.
8. Some companies that use process costing simply assign
the entire cost of production to those units completed
pleted during the period computed?
and transferred during the month, even if some units
period
15.
assumption, how is the number of units started
2018-1
BRIEF EXERCISE 18.1
electing Cost Accounting
ystems
a.
e.
Brief Exercises
process costing system, or both.
Determine whether each of the following companies is best suited for a job order costs
C. Erickson & Sons, Inc. (a construction company with multiple job sites).
b. Apple Computer (a manufacturer of computers for individual and institutional clients,
C.
and school districts).
Play World Systems, Inc. (a provider of custom-designed playground equipment for city
d. Strong Industries (a manufacturer of injection-molded plastic doghouses).
Nature Made Nutritional Products (a maker of vitamins and nutritional supplements
Match the business with the appropriate cost system(s) for that business using the number
cost system where 1 = job order costing, 2 = process costing, and 3 =
Ketcher, Tryer, and Friar, attorneys-at-law.
b. Walmart Inc.
C. Johnson & Johnson Company.
d. Handyman Special, Inc.
e. Carpet Makers Corporation.
8-1
EF EXERCISE 18.2
– activity-based costing
a.
ching Cost Systems and
ness Activities
2
– EXERCISE 18.3
of Costs in a Cost
nting System
For each of the four accounts listed, prepare an example of a journal entry that would ca
account to be (1) debited and (2) credited using a process costing system. Assume perpetu
tory records are maintained. Include written explanations with your journal entries and
in place of dollar amounts.
Materials Inventory.
b. Direct Labor.
Manufacturing Overhead.
d. Finished Goods Inventory.
C.
18TH EDITION
&
Financial &
Managerial
Accounting
THE BASIS FOR BUSINESS DECISIONS
JAN R. WILLIAMS
University of Tennessee
SUSAN F. HAKA
Michigan State University
MARK S. BETTNER
Bucknell University
JOSEPH V. CARCELLO
University of Tennessee
Mc
Graw
Hill
Education

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