Chapter 15: Q14DQ (page 695)
Assume Sprint will install and service a server to link all of a customer’s employees’ smartphones to a centralized company server for an up-front flat price. How can Sprint use a job order costing system?
The business entity must use the job lot while using the job order costing system.
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Custom Cabinetry has one job in process (Job 120) as of June 30; at that time, its job cost sheet reports direct materials of \(6,000, direct labor of \)2,800, and applied overhead of \(2,240. Custom Cabinetry applies overhead at the rate of 80% of direct labor cost. During July, Job 120 is sold (on account) for \)22,000, Job 121 is started and completed, and Job 122 is started and still in process at the end of the month. Custom Cabinetry incurs the following costs during July.
July Product Costs | Job 120 | Job 121 | Job 122 | Total |
Direct materials | \(1,000 | \)6,000 | \(2,500 | \)9,500 |
Direct labor | 2,200 | 3,700 | 2,100 | 8,000 |
Overhead applied | ? | ? | ? | ? |
1. Prepare journal entries for the following transactions and events a through e in July.
A recent balance sheet for Porsche AG shows beginning raw materials inventory of €83 million and ending raw materials inventory of €85 million. Assume the company purchased raw materials (on account) for €3,108 million during the year.
(1) Prepare journal entries to record (a) the purchase of raw materials and (b) the use of raw materials in production.
(2) What do you notice about the € amounts in your journal entries?
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.
In December 2016, Custom Mfg. established its predetermined overhead rate for jobs produced during 2017 by using the following cost predictions: overhead costs, \(750,000, and direct materials costs, \)625,000. At year-end 2017, the company’s records show that actual overhead costs for the year are \(830,000. Actual direct materials cost had been assigned to jobs as follows.
Jobs completed and sold | \)513,750 |
Jobs in finished goods inventory | 102,750 |
Jobs in work in process inventory | 68,500 |
Total actual direct materials cost | $685,000 |
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