Chapter 15: Q12DQ (page 695)
How would a hospital apply job order costing? Explain.
The job order costing can be usedin the hospitalbecause different patients have different diseases.
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Starr Mfg.’s predetermined overhead rate is 200% of direct labor. Information on the company’s production activities during September 2017 follows.
a. Purchased raw materials on credit, \(125,000.
b. Materials requisitions record use of the following materials for the month.
Job 487 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \)30,000
Job 488 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Job 489 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
Job 490 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000
Job 491 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Total direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
Total materials used . . . . . . . . . . . . . . . . . . . . . . . . . . \(92,000
c. Paid \)11,000 cash for miscellaneous factory overhead costs.
d. Time tickets record use of the following labor for the month. These wages are paid in cash.
Job 487 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \( 8,000
Job 488 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000
Job 489 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Job 490 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000
Job 491 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Total direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,000
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \)84,000
e. Applied overhead to Jobs 487, 489, and 490.
f. Transferred Jobs 487, 489, and 490 to Finished Goods.
g. Sold Jobs 487 and 489 on credit for a total price of \(340,000.
h. The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance).
Depreciation of factory building . . . . . . . . . . . . . . . . . . \)37,000
Depreciation of factory equipment . . . . . . . . . . . . . . . . 21,000
Expired factory insurance . . . . . . . . . . . . . . . . . . . . . . . 7,000
Accrued property taxes payable . . . . . . . . . . . . . . . . . . 31,000
Required
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.
In December 2016, Shire Computer’s management establishes the 2017 predetermined overhead rate based on direct labor cost. The information used in setting this rate includes estimates that the company will incur \(747,500 of overhead costs and \)575,000 of direct labor cost in year 2017. During March 2017, Shire began and completed Job 13-56.
1. What is the predetermined overhead rate for 2017?
2. Use the information on the following job cost sheet to determine the total cost of the job.
JOB COST SHEET Customer’s Name Keiser Co Job No 13-56 Job Description 5 plasma monitors—61 inch Overhead Direct Materials Direct Labor Costs Applied Date Requisition No. Amount Time-Ticket No Amount Rate Amount Mar. 8 4-129 \(5,000 T-306 \) 700 Mar. 11 4-142 7,020 T-432 1,250 Mar. 18 4-167 3,330 T-456 1,250 Totals |
The left column lists the titles of documents and accounts used in job order costing. The right column presents short descriptions of the purposes of the documents. Match each document in the left column to its numbered description in the right column.
A. Time ticket | 1. Shows amount of time an employee works on a job. |
B. Material ledger card | 2. Accumulates the cost of incurred overhead and the overhead cost assigned to specific jobs. |
C. Voucher | 3. Perpetual inventory record of raw materials received, used, and available for use. |
D. Factory overhead account | 4. Shows amount approved for payment of an overhead or other cost. |
E. Material requisition | 5. Communicates the need for materials to complete a job. |
In December 2016, Infodeo established its predetermined overhead rate for movies produced during 2017 by using the following cost predictions: overhead costs, \(1,680,000, and direct labor costs, \)480,000. At year-end 2017, the company’s records show that actual overhead costs for the year are \(1,652,000. Actual direct labor cost had been assigned to jobs as follows.
Movies completed and released . . . . . . . . . . . . . . . \)425,000
Movies still in production . . . . . . . . . . . . . . . . . . . . . 50,000
Total actual direct labor cost . . . . . . . . . . . . . . . . . . . $475,000
1. Determine the predetermined overhead rate for 2017.
2. Set up a T-account for overhead and enter the overhead costs incurred and the amounts applied to movies during the year using the predetermined overhead rate.
3. Determine whether overhead is overapplied or underapplied (and the amount) during the year.
4. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold.
Google applies overhead to product costs. What account(s) is(are) used to eliminate overapplied or underapplied overhead from the Factory Overhead account, assuming the amount is not material?
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