Chapter 15: Q13E (page 699)
Refer to information in Exercise 15-7. Prepare the journal entry to close overapplied or underapplied overhead to Cost of Goods Sold.
The underapplied overhead to the Cost of Goods Sold is $29,500
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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.)
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. |
Question: Some companies use labor cost to apply factory overhead to jobs. Identify another factor (or base) a company might reasonably use to apply overhead costs.
Refer to this chapter’s Global View. Porsche AG is the manufacturer of the Porsche automobile line. Does Porsche produce in jobs or in job lots? Explain.
Record the journal entry to close over- or underapplied factory overhead to Cost of Goods Sold for each of the two companies below.
Storm Concert Promotions | Valle Home Builders | |
Actual indirect materials costs | \(22,000 | \) 12,500 |
Actual indirect labor costs | 46,000 | 46,500 |
Other overhead costs | 17,000 | 47,000 |
Overhead applied | 88,200 | 105,200 |
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