Chapter 15: Q10E (page 698)
Use information in Exercise 15-7 to prepare journal entries for the following events for the month of May.
Factory overhead$120,000
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How would a hospital apply job order costing? Explain.
An advertising agency used 65 hours of direct labor in creating advertising for a music festival. Direct labor costs \(50 per hour. The agency applies overhead at a rate of \)40 per direct labor hour. Prepare journal entries to record the agency’s direct labor and the applied overhead costs for this job.
As of the end of June, the job cost sheets at Racing Wheels, Inc., show the following total costs accumulated on three custom jobs.
Job 102 | Job 103 | Job 104 | |
Direct materials | \(15,000 | \)33,000 | \(27,000 |
Direct labor | 8,000 | 14,200 | 21,000 |
Overhead applied | 4,000 | 7,100 | 10,500 |
Job 102 was started in production in May, and the following costs were assigned to it in May: direct materials, \)6,000; direct labor, \(1,800; and overhead, \)900. Jobs 103 and 104 were started in June. Overhead cost is applied with a predetermined rate based on direct labor cost. Jobs 102 and 103 were finished in June, and Job 104 is expected to be finished in July. No raw materials were used indirectly in June. Using this information, answer the following questions. (Assume this company’s predetermined overhead rate did not change across these months.)
Manufacturers and merchandisers can apply just-in-time (JIT) to their inventory management. Apple wants to know the impact of a JIT inventory system on operating cash flows. Review Apple’s statement of cash flows in Appendix A to answer the following.
Required
1. Identify the impact on operating cash flows (increase or decrease) for changes in inventory levels (increase or decrease) for each of the three most recent years.
2. What impact would a JIT inventory system have on Apple’s operating income? Link the answer to your response for part 1.
3. Would the move to a JIT system have a one-time or recurring impact on operating cash flow?
Widmer Watercraft’s predetermined overhead rate for 2017 is 200% of direct labor. Information on the company’s production activities during May 2017 follows.
a. Purchased raw materials on credit, \(200,000.
b. Materials requisitions record use of the following materials for the month.
Job 136 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \) 48,000
Job 137 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,000
Job 138 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,200
Job 139 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,400
Job 140 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,400
Total direct materials . . . . . . . . . . . . . . . . . . . . . . . . . 128,000
Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,500
Total materials used . . . . . . . . . . . . . . . . . . . . . . . . . \(147,500
c. Paid \)15,000 cash to a computer consultant to reprogram factory equipment.
d. Time tickets record use of the following labor for the month. These wages were paid in cash
Job 136 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \( 12,000
Job 137 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,500
Job 138 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,500
Job 139 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,000
Job 140 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Total direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,000
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \)126,000
e. Applied overhead to Jobs 136, 138, and 139.
f. Transferred Jobs 136, 138, and 139 to Finished Goods.
g. Sold Jobs 136 and 138 on credit at a total price of \(525,000.
h. The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance).
Depreciation of factory building . . . . . . . . . . . . . . . . \)68,000
Depreciation of factory equipment . . . . . . . . . . . . . 36,500
Expired factory insurance . . . . . . . . . . . . . . . . . . . . . 10,000
Accrued property taxes payable . . . . . . . . . . . . . . . . 35,000
Required
1. Prepare a job cost sheet for each job worked on during the month. Use the following simplified form.
Job No. __________
Materials . . . . . . . . . . \(
Labor . . . . . . . . . . . . .
Overhead . . . . . . . . . .
Total cost . . . . . . . . . \)
2. Prepare journal entries to record the events and transactions a through i.
3. Set up T-accounts for each of the following general ledger accounts, each of which started the month with a zero balance: Raw Materials Inventory; Work in Process Inventory; Finished Goods Inventory; Factory Overhead; Cost of Goods Sold. Then post the journal entries to these T-accounts and determine the balance of each account.
4. Prepare a report showing the total cost of each job in process and prove that the sum of their costs equals the Work in Process Inventory account balance. Prepare similar reports for Finished Goods Inventory and Cost of Goods Sold.
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