76 2 Job Order Costing

5. Your roommate asks your help in understanding the 13. Sam Bowden believes actual manufacturing overhead
major steps in the flow of costs in a job order cost should be charged to jobs. Do you agree? Why or why
system. Identify the steps for your roommate. not?
6. There are three inventory control accounts in a job 14. What elements are involved in computing a predeter-
order system. Identify the control accounts and their mined overhead rate?
subsidiary ledgers. 15. How can the agreement of Work in Process Inventory
7. What source documents are used in accumulating and job cost sheets be verified?
direct labor costs? 16. Jane Neff believes that the cost of goods manufac-
8. “Entries to Manufacturing Overhead normally are tured schedule in job order cost accounting is the
only made daily.” Do you agree? Explain. same as shown in Chapter 1. Is Jane correct? Explain.
9. Stan Kaiser is confused about the source documents 17. Matt Litkee is confused about under- and overapplied
used in assigning materials and labor costs. Identify manufacturing overhead. Define the terms for Matt,
the documents and give the entry for each document. and indicate the balance in the manufacturing over-
10. What is the purpose of a job cost sheet? head account applicable to each term.
11. Indicate the source documents that are used in charg- 18. “At the end of the year, under- or overapplied overhead
ing costs to specific jobs. is closed to Income Summary.” Is this correct? If not,
12. Explain the purpose and use of a “materials requisi- indicate the customary treatment of this amount.
tion slip” as used in a job order cost system.

BRIEF EXERCISES

Prepare a flowchart of a job BE2-1 Knox Company begins operations on January 1. Because all work is done to cus-
order cost accounting system, tomer specifications, the company decides to use a job order cost system. Prepare a flow-
and identify transactions. chart of a typical job order system with arrows showing the flow of costs. Identify the eight
(LO 2), C transactions.
Prepare entries in accumulating BE2-2 During January, its first month of operations, Knox Company accumulated the fol-
manufacturing costs. lowing manufacturing costs: raw materials $4,000 on account, factory labor $6,000 of which
(LO 2), AP $5,200 relates to factory wages payable and $800 relates to payroll taxes payable, and utili-
ties payable $2,000. Prepare separate journal entries for each type of manufacturing cost.
Prepare entry for the assignment BE2-3 In January, Knox Company requisitions raw materials for production as follows:
of raw materials costs. Job 1 $900, Job 2 $1,400, Job 3 $700, and general factory use $600. Prepare a summary
(LO 3), AP journal entry to record raw materials used.
Prepare entry for the assignment BE2-4 Factory labor data for Knox Company is given in BE2-2. During January, time tick-
of factory labor costs. ets show that the factory labor of $6,000 was used as follows: Job 1 $2,200, Job 2 $1,600,
(LO 3), AP Job 3 $1,400, and general factory use $800. Prepare a summary journal entry to record
factory labor used.
Prepare job cost sheets. BE2-5 Data pertaining to job cost sheets for Knox Company are given in BE2-3 and BE2-4.
(LO 3), AP Prepare the job cost sheets for each of the three jobs. (Note: You may omit the column for
Manufacturing Overhead.)
Compute predetermined BE2-6 Marquis Company estimates that annual manufacturing overhead costs will be
overhead rates. $900,000. Estimated annual operating activity bases are direct labor cost $500,000, direct
(LO 4), AP labor hours 50,000, and machine hours 100,000. Compute the predetermined overhead
rate for each activity base.
Assign manufacturing BE2-7 During the first quarter, Roland Company incurs the following direct labor costs:
overhead to production. January $40,000, February $30,000, and March $50,000. For each month, prepare the entry
(LO 4), AP to assign overhead to production using a predetermined rate of 80% of direct labor cost.
Prepare entries for completion BE2-8 In March, Stinson Company completes Jobs 10 and 11. Job 10 cost $20,000 and
and sale of completed jobs. Job 11 $30,000. On March 31, Job 10 is sold to the customer for $35,000 in cash. Journal-
(LO 5), AP ize the entries for the completion of the two jobs and the sale of Job 10.
Prepare entries for service BE2-9 Preprah Engineering Contractors incurred service salaries and wages of $32,000
salaries and wages and ($24,000 direct and $8,000 indirect) on an engineering project. The company applies over-
operating overhead. head at a rate of 25% of direct labor. Record the entries to assign service salaries and
(LO 5), AP wages and to apply overhead.
Prepare adjusting entries for BE2-10 At December 31, balances in Manufacturing Overhead are Shimeca Company—
under- and overapplied overhead. debit $1,200, Garcia Company—credit $900. Prepare the adjusting entry for each com-
(LO 6), C pany at December 31, assuming the adjustment is made to cost of goods sold.
 Exercises 77

> DO IT! REVIEW

DO IT! 2-1 During the current month, Tomlin Company incurs the following manufactur- Prepare journal entries
ing costs. for manufacturing costs.
(a) Purchased raw materials of $16,000 on account. (LO 2), AP
(b) Incurred factory labor of $40,000. Of that amount, $31,000 relates to wages payable
and $9,000 relates to payroll taxes payable.
(c) Factory utilities of $3,100 are payable, prepaid factory property taxes of $2,400 have
expired, and depreciation on the factory building is $9,500.
Prepare journal entries for each type of manufacturing cost. (Use a summary entry to
record manufacturing overhead.)
DO IT! 2-2 Milner Company is working on two job orders. The job cost sheets show the Assign costs to work in
following. process.
(LO 3, 4), AP
Job 201 Job 202
Direct materials $7,200 $9,000
Direct labor 4,000 8,000
Manufacturing overhead 5,200 9,800
Prepare the three summary entries to record the assignment of costs to Work in Process
from the data on the job cost sheets.
DO IT! 2-3 During the current month, Reyes Corporation completed Job 310 and Job Prepare entries for completion
312. Job 310 cost $60,000 and Job 312 cost $50,000. Job 312 was sold on account for and sale of jobs.
$90,000. Journalize the entries for the completion of the two jobs and the sale of Job 312. (LO 5), AP
DO IT! 2-4 For Eckstein Company, the predetermined overhead rate is 130% of direct Apply manufacturing over-
labor cost. During the month, Eckstein incurred $100,000 of factory labor costs, of head and determine under- or
which $85,000 is direct labor and $15,000 is indirect labor. Actual overhead incurred was overapplication.
$115,000. Compute the amount of manufacturing overhead applied during the month. (LO 6), AN
Determine the amount of under- or overapplied manufacturing overhead.

✔ The Navigator

EXERCISES

E2-1 The gross earnings of the factory workers for Vargas Company during the month of Prepare entries for factory
January are $66,000. The employer’s payroll taxes for the factory payroll are $8,000. The labor.
fringe benefits to be paid by the employer on this payroll are $6,000. Of the total accumulated (LO 2, 3), AP
cost of factory labor, 85% is related to direct labor and 15% is attributable to indirect labor.
Instructions
(a) Prepare the entry to record the factory labor costs for the month of January.
(b) Prepare the entry to assign factory labor to production.
E2-2 Stine Company uses a job order cost system. On May 1, the company has a balance in Prepare journal entries for
Work in Process Inventory of $3,500 and two jobs in process: Job No. 429 $2,000, and Job manufacturing costs.
No. 430 $1,500. During May, a summary of source documents reveals the following. (LO 2, 3, 4, 5), AP
Materials Labor
Job Number Requisition Slips Time Tickets
429 $2,500 $1,900
430 3,500 3,000
431 4,400 $10,400 7,600 $12,500
General use 800 1,200
$11,200 $13,700
78 2 Job Order Costing

Stine Company applies manufacturing overhead to jobs at an overhead rate of 60% of

direct labor cost. Job No. 429 is completed during the month.
Instructions
(a) Prepare summary journal entries to record (i) the requisition slips, (ii) the time tickets,
(iii) the assignment of manufacturing overhead to jobs, and (iv) the completion of Job
No. 429.
(b) Post the entries to Work in Process Inventory, and prove the agreement of the control
account with the job cost sheets. (Use a T-account.)
Analyze a job cost sheet E2-3 A job order cost sheet for Lowry Company is shown below.
and prepare entries for
manufacturing costs.
Job No. 92 For 2,000 Units
(LO 2, 3, 4, 5), AP
Direct Direct Manufacturing
Date Materials Labor Overhead
Beg. bal. Jan. 1 5,000 6,000 5,100
8 6,000
12 8,000 6,400
25 2,000
27 4,000 3,200
13,000 18,000 14,700

Cost of completed job:

Direct materials $13,000
Direct labor 18,000
Manufacturing overhead 14,700
Total cost $45,700
Unit cost ($45,700 4 2,000) $22.85

Instructions
(a) On the basis of the foregoing data, answer the following questions.
(1) What was the balance in Work in Process Inventory on January 1 if this was the
only unfinished job?
(2) If manufacturing overhead is applied on the basis of direct labor cost, what over-
head rate was used in each year?
(b) Prepare summary entries at January 31 to record the current year’s transactions per-
taining to Job No. 92.
Analyze costs of manufac- E2-4 Manufacturing cost data for Orlando Company, which uses a job order cost system,
turing and determine missing are presented below.
amounts.
Case A Case B Case C
(LO 2, 6), AN
Direct materials used $ (a) $ 83,000 $ 63,150
Direct labor 50,000 140,000 (h)
Manufacturing overhead applied 42,500 (d) (i)
Total manufacturing costs 145,650 (e) 213,000
Work in process 1/1/14 (b) 15,500 18,000
Total cost of work in process 201,500 (f) (j)
Work in process 12/31/14 (c) 11,800 (k)
Cost of goods manufactured 192,300 (g) 222,000

Compute the manufacturing Instructions

overhead rate and under- or Indicate the missing amount for each letter. Assume that in all cases manufacturing over-
overapplied overhead. head is applied on the basis of direct labor cost and the rate is the same.
(LO 4, 6), AN E2-5 Duggan Company applies manufacturing overhead to jobs on the basis of machine
hours used. Overhead costs are expected to total $325,000 for the year, and machine usage
is estimated at 125,000 hours.
For the year, $342,000 of overhead costs are incurred and 130,000 hours are used.
 Exercises 79

Instructions
(a) Compute the manufacturing overhead rate for the year.
(b) What is the amount of under- or overapplied overhead at December 31?
(c) Prepare the adjusting entry to assign the under- or overapplied overhead for the year
to cost of goods sold.
E2-6 A job cost sheet of Sandoval Company is given below. Analyze job cost sheet
and prepare entry for
completed job.
Job Cost Sheet
(LO 2, 3, 4, 5), AP
JOB NO. 469 Quantity 2,500
ITEM White Lion Cages Date Requested 7/2
FOR Todd Company Date Completed 7/31
Direct Direct Manufacturing
Date Materials Labor Overhead
7/10 700
12 900
15 440 550
22 380 475
24 1,600
27 1,500
31 540 675
Cost of completed job:
Direct materials
Direct labor
Manufacturing overhead
Total cost
Unit cost

Instructions
(a) Answer the following questions.
(1) What are the source documents for direct materials, direct labor, and manufac-
turing overhead costs assigned to this job?
(2) What is the predetermined manufacturing overhead rate?
(3) What are the total cost and the unit cost of the completed job? (Round unit cost
to nearest cent.)
(b) Prepare the entry to record the completion of the job.
E2-7 Torre Corporation incurred the following transactions. Prepare entries for
1. Purchased raw materials on account $46,300. manufacturing and
nonmanufacturing costs.
2. Raw materials of $36,000 were requisitioned to the factory. An analysis of the materials
requisition slips indicated that $6,800 was classified as indirect materials. (LO 2, 3, 4, 5), AP
3. Factory labor costs incurred were $55,900, of which $51,000 pertained to factory wages
payable and $4,900 pertained to employer payroll taxes payable.
4. Time tickets indicated that $50,000 was direct labor and $5,900 was indirect labor.
5. Manufacturing overhead costs incurred on account were $80,500.
6. Depreciation on the company’s office building was $8,100.
7. Manufacturing overhead was applied at the rate of 150% of direct labor cost.
8. Goods costing $88,000 were completed and transferred to finished goods.
9. Finished goods costing $75,000 to manufacture were sold on account for $103,000.
Instructions
Journalize the transactions. (Omit explanations.)
E2-8 Enos Printing Corp. uses a job order cost system. The following data summarize the Prepare entries for
operations related to the first quarter’s production. manufacturing and
nonmanufacturing costs.
1. Materials purchased on account $192,000, and factory wages incurred $87,300.
2. Materials requisitioned and factory labor used by job: (LO 2, 3, 4, 5), AP
80 2 Job Order Costing

Job Number Materials Factory Labor

A20 $ 35,240 $18,000
A21 42,920 22,000
A22 36,100 15,000
A23 39,270 25,000
General factory use 4,470 7,300
$158,000 $87,300

3. Manufacturing overhead costs incurred on account $49,500.

4. Depreciation on factory equipment $14,550.
5. Depreciation on the company’s office building was $14,300.
6. Manufacturing overhead rate is 90% of direct labor cost.
7. Jobs completed during the quarter: A20, A21, and A23.
Instructions
Prepare entries to record the operations summarized above. (Prepare a schedule showing
the individual cost elements and total cost for each job in item 7.)
Prepare a cost of goods E2-9 At May 31, 2014, the accounts of Mantle Company show the following.
manufactured schedule and 1. May 1 inventories—finished goods $12,600, work in process $14,700, and raw materials
partial financial statements.
$8,200.
(LO 2, 5), AP 2. May 31 inventories—finished goods $9,500, work in process $17,900, and raw materials
$7,100.
3. Debit postings to work in process were direct materials $62,400, direct labor $50,000,
and manufacturing overhead applied $40,000.
4. Sales revenue totaled $210,000.
Instructions
(a) Prepare a condensed cost of goods manufactured schedule.
(b) Prepare an income statement for May through gross profit.
(c) Indicate the balance sheet presentation of the manufacturing inventories at May 31,
2014.
Compute work in process and E2-10 Tierney Company begins operations on April 1. Information from job cost sheets
finished goods from job cost shows the following.
sheets.
Manufacturing Costs Assigned
(LO 3, 5), AP
Job Month
Number April May June Completed
10 $5,200 $4,400 May
11 4,100 3,900 $2,000 June
12 1,200 April
13 4,700 4,500 June
14 5,900 3,600 Not complete
Job 12 was completed in April. Job 10 was completed in May. Jobs 11 and 13 were
completed in June. Each job was sold for 25% above its cost in the month following
completion.
Instructions
(a) What is the balance in Work in Process Inventory at the end of each month?
(b) What is the balance in Finished Goods Inventory at the end of each month?
(c) What is the gross profit for May, June, and July?
Prepare entries for costs of E2-11 Shown below are the job cost related accounts for the law firm of Jack, Bob, and
services provided. Will and their manufacturing equivalents:
(LO 2, 4, 5), AP Law Firm Accounts Manufacturing Firm Accounts
Supplies Raw Materials
Salaries and Wages Payable Factory Wages Payable
Operating Overhead Manufacturing Overhead
Service Contracts in Process Work in Process
Cost of Completed Service Contracts Cost of Goods Sold
 Problems: Set A 81

Cost data for the month of March follow.

1. Purchased supplies on account $1,500.
2. Issued supplies $1,200 (60% direct and 40% indirect).
3. Assigned labor costs based on time cards for the month which indicated labor costs of
$60,000 (80% direct and 20% indirect).
4. Operating overhead costs incurred for cash totaled $40,000.
5. Operating overhead is applied at a rate of 90% of direct attorney cost.
6. Work completed totaled $75,000.
Instructions
(a) Journalize the transactions for March. (Omit explanations.)
(b) Determine the balance of the Service Contracts in Process account. (Use a T-account.)
E2-12 Don Lieberman and Associates, a CPA firm, uses job order costing to capture the Determine cost of jobs and
costs of its audit jobs. There were no audit jobs in process at the beginning of November. ending balance in work in
Listed below are data concerning the three audit jobs conducted during November. process and overhead
accounts.
Lynn Brian Mike
(LO 3, 4, 6), AP
Direct materials $600 $400 $200
Auditor labor costs $5,400 $6,600 $3,375
Auditor hours 72 88 45
Overhead costs are applied to jobs on the basis of auditor hours, and the predetermined
overhead rate is $50 per auditor hour. The Lynn job is the only incomplete job at the end
of November. Actual overhead for the month was $11,000.
Instructions
(a) Determine the cost of each job.
(b) Indicate the balance of the Service Contracts in Process account at the end of November.
(c) Calculate the ending balance of the Operating Overhead account for November.
E2-13 Pure Decorating uses a job order cost system to collect the costs of its interior deco- Determine predetermined
rating business. Each client’s consultation is treated as a separate job. Overhead is applied overhead rate, apply overhead
to each job based on the number of decorator hours incurred. Listed below are data for and determine whether balance
the current year. under- or overapplied.
(LO 4, 6), AP
Estimated overhead $920,000
Actual overhead $942,800
Estimated decorator hours 40,000
Actual decorator hours 40,500
The company uses Operating Overhead in place of Manufacturing Overhead.
Instructions
(a) Compute the predetermined overhead rate.
(b) Prepare the entry to apply the overhead for the year.
(c) Determine whether the overhead was under- or overapplied and by how much.

EXERCISES: SET B AND

CHALLENGE EXERCISES

Visit the book’s companion website, at [Link]/college/weygandt, and choose

the Student Companion site to access Exercise Set B and Challenge Exercises.

PROBLEMS: SET A

P2-1A Degelman Company uses a job order cost system and applies overhead to produc- Prepare entries in a job order
tion on the basis of direct labor costs. On January 1, 2014, Job No. 50 was the only job in cost system and job cost sheets.
process. The costs incurred prior to January 1 on this job were as follows: direct materials (LO 2, 3, 4, 5, 6), AP
82 2 Job Order Costing

$20,000, direct labor $12,000, and manufacturing overhead $16,000. As of January 1, Job
No. 49 had been completed at a cost of $90,000 and was part of finished goods inventory.
There was a $15,000 balance in the Raw Materials Inventory account.
During the month of January, Degelman Company began production on Jobs 51 and
52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the
month for $122,000 and $158,000, respectively. The following additional events occurred
during the month.
1. Purchased additional raw materials of $90,000 on account.
2. Incurred factory labor costs of $70,000. Of this amount $16,000 related to employer
payroll taxes.
3. Incurred manufacturing overhead costs as follows: indirect materials $17,000; indirect
labor $20,000; depreciation expense on equipment $19,000; and various other manu-
facturing overhead costs on account $16,000.
4. Assigned direct materials and direct labor to jobs as follows.

Job No. Direct Materials Direct Labor

50 $10,000 $ 5,000
51 39,000 25,000
52 30,000 20,000

Instructions
(a) Calculate the predetermined overhead rate for 2014, assuming Degelman Company
estimates total manufacturing overhead costs of $980,000, direct labor costs of
$700,000, and direct labor hours of 20,000 for the year.
(b) Open job cost sheets for Jobs 50, 51, and 52. Enter the January 1 balances on the job
cost sheet for Job No. 50.
(c) Prepare the journal entries to record the purchase of raw materials, the factory labor
costs incurred, and the manufacturing overhead costs incurred during the month of
January.
(d) Prepare the journal entries to record the assignment of direct materials, direct labor,
and manufacturing overhead costs to production. In assigning manufacturing over-
head costs, use the overhead rate calculated in (a). Post all costs to the job cost sheets
as necessary.
(e) Job 50, $70,000 (e) Total the job cost sheets for any job(s) completed during the month. Prepare the jour-
Job 51, $99,000 nal entry (or entries) to record the completion of any job(s) during the month.
(f) Prepare the journal entry (or entries) to record the sale of any job(s) during the
month.
(g) What is the balance in the Finished Goods Inventory account at the end of the month?
What does this balance consist of?
(h) What is the amount of over- or underapplied overhead?

Prepare entries in a job P2-2A For the year ended December 31, 2014, the job cost sheets of Cinta Company
order cost system and partial contained the following data.
income statement.
(LO 2, 3, 4, 5, 6), AN Job Direct Direct Manufacturing Total
Number Explanation Materials Labor Overhead Costs
7640 Balance 1/1 $25,000 $24,000 $28,800 $ 77,800
Current year’s costs 30,000 36,000 43,200 109,200
7641 Balance 1/1 11,000 18,000 21,600 50,600
Current year’s costs 43,000 48,000 57,600 148,600
7642 Current year’s costs 58,000 55,000 66,000 179,000

Other data:
1. Raw materials inventory totaled $15,000 on January 1. During the year, $140,000 of raw
materials were purchased on account.
2. Finished goods on January 1 consisted of Job No. 7638 for $87,000 and Job No. 7639
for $92,000.
3. Job No. 7640 and Job No. 7641 were completed during the year.
4. Job Nos. 7638, 7639, and 7641 were sold on account for $530,000.
 Problems: Set A 83

5. Manufacturing overhead incurred on account totaled $120,000.

6. Other manufacturing overhead consisted of indirect materials $14,000, indirect labor
$18,000, and depreciation on factory machinery $8,000.

Instructions
(a) Prove the agreement of Work in Process Inventory with job cost sheets pertaining to (a) $179,000; Job 7642:
unfinished work. (Hint: Use a single T-account for Work in Process Inventory.) Cal- $179,000
culate each of the following, then post each to the T-account: (1) beginning balance,
(2) direct materials, (3) direct labor, (4) manufacturing overhead, and (5) completed
jobs.
(b) Prepare the adjusting entry for manufacturing overhead, assuming the balance is (b) Amount 5 $6,800
allocated entirely to Cost of Goods Sold.
(c) Determine the gross profit to be reported for 2014. (c) $158,600

P2-3A Stellar Inc. is a construction company specializing in custom patios. The patios Prepare entries in a job order
are constructed of concrete, brick, fiberglass, and lumber, depending upon customer cost system and cost of goods
preference. On June 1, 2014, the general ledger for Stellar Inc. contains the following manufactured schedule.
data. (LO 2, 3, 4, 5), AP
Raw Materials Inventory $4,200 Manufacturing Overhead Applied $32,640
Work in Process Inventory $5,540 Manufacturing Overhead Incurred $31,650
Subsidiary data for Work in Process Inventory on June 1 are as follows.

Job Cost Sheets

Customer Job
Cost Element Gannon Rosenthal Linton
Direct materials $ 600 $ 800 $ 900
Direct labor 320 540 580
Manufacturing overhead 400 675 725
$1,320 $2,015 $2,205

During June, raw materials purchased on account were $4,900, and all wages were
paid. Additional overhead costs consisted of depreciation on equipment $700 and miscel-
laneous costs of $400 incurred on account.
A summary of materials requisition slips and time tickets for June shows the following.

Customer Job Materials Requisition Slips Time Tickets

Gannon $ 800 $ 450
Koss 2,000 800
Rosenthal 500 360
Linton 1,300 1,200
Gannon 300 390
4,900 3,200
General use 1,500 1,200
$6,400 $4,400

Overhead was charged to jobs at the same rate of $1.25 per dollar of direct labor cost.
The patios for customers Gannon, Rosenthal, and Linton were completed during June and
sold for a total of $18,900. Each customer paid in full.

Instructions
(a) Journalize the June transactions: (i) for purchase of raw materials, factory labor
costs incurred, and manufacturing overhead costs incurred; (ii) assignment of direct
materials, labor, and overhead to production; and (iii) completion of jobs and sale of
goods.
(b) Post the entries to Work in Process Inventory.
(c) Reconcile the balance in Work in Process Inventory with the costs of unfinished jobs. (d) Cost of goods
(d) Prepare a cost of goods manufactured schedule for June. manufactured $13,840
84 2 Job Order Costing

Compute predetermined over- P2-4A Agassi Company uses a job order cost system in each of its three manufacturing
head rates, apply overhead, departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in
and calculate under- or Department D, direct labor hours in Department E, and machine hours in Department K.
overapplied overhead. In establishing the predetermined overhead rates for 2014, the following estimates
(LO 4, 6), AP were made for the year.
Department
D E K
Manufacturing overhead $1,200,000 $1,500,000 $900,000
Direct labor costs $1,500,000 $1,250,000 $450,000
Direct labor hours 100,000 125,000 40,000
Machine hours 400,000 500,000 120,000
During January, the job cost sheets showed the following costs and production data.
Department
D E K
Direct materials used $140,000 $126,000 $78,000
Direct labor costs $120,000 $110,000 $37,500
Manufacturing overhead incurred $ 99,000 $124,000 $79,000
Direct labor hours 8,000 11,000 3,500
Machine hours 34,000 45,000 10,400

(a) 80%, $12, $7.50 Instructions

(b) $356,000, $368,000, (a) Compute the predetermined overhead rate for each department.
$193,500 (b) Compute the total manufacturing costs assigned to jobs in January in each department.
(c) $3,000, $(8,000), $1,000 (c) Compute the under- or overapplied overhead for each department at January 31.

Analyze manufacturing P2-5A Rodman Corporation’s fiscal year ends on November 30. The following accounts
accounts and determine are found in its job order cost accounting system for the first month of the new fiscal year.
missing amounts.
(LO 2, 3, 4, 5, 6), AN Raw Materials Inventory
Dec. 1 Beginning balance (a) Dec. 31 Requisitions 16,850
31 Purchases 19,225
Dec. 31 Ending balance 7,975
Work in Process Inventory
Dec. 1 Beginning balance (b) Dec. 31 Jobs completed (f)
31 Direct materials (c)
31 Direct labor 8,800
31 Overhead (d)
Dec. 31 Ending balance (e)
Finished Goods Inventory
Dec. 1 Beginning balance (g) Dec. 31 Cost of goods sold (i)
31 Completed jobs (h)
Dec. 31 Ending balance (j)
Factory Labor
Dec. 31 Factory wages 12,025 Dec. 31 Wages assigned (k)
Manufacturing Overhead
Dec. 31 Indirect materials 1,900 Dec. 31 Overhead applied (m)
31 Indirect labor (l)
31 Other overhead 1,245

Other data:
1. On December 1, two jobs were in process: Job No. 154 and Job No. 155. These jobs had
combined direct materials costs of $9,750 and direct labor costs of $15,000. Overhead
was applied at a rate that was 75% of direct labor cost.
 Problems: Set B 85

2. During December, Job Nos. 156, 157, and 158 were started. On December 31, Job
No. 158 was unfinished. This job had charges for direct materials $3,800 and direct
labor $4,800, plus manufacturing overhead. All jobs, except for Job No. 158, were com-
pleted in December.
3. On December 1, Job No. 153 was in the finished goods warehouse. It had a total cost of
$5,000. On December 31, Job No. 157 was the only job finished that was not sold. It had
a cost of $4,000.
4. Manufacturing overhead was $230 overapplied in December.
(c) $14,950
Instructions (f) $54,150
List the letters (a) through (m) and indicate the amount pertaining to each letter. (i) $55,150

PROBLEMS: SET B

P2-1B Pedriani Company uses a job order cost system and applies overhead to produc- Prepare entries in a job order
tion on the basis of direct labor hours. On January 1, 2014, Job No. 25 was the only job cost system and job cost
in process. The costs incurred prior to January 1 on this job were as follows: direct ma- sheets.
terials $10,000; direct labor $6,000; and manufacturing overhead $9,000. Job No. 23 had (LO 2, 3, 4, 5, 6), AP
been completed at a cost of $42,000 and was part of finished goods inventory. There was a
$5,000 balance in the Raw Materials Inventory account.
During the month of January, the company began production on Jobs 26 and 27, and
completed Jobs 25 and 26. Jobs 23 and 25 were sold on account during the month for $63,000
and $74,000, respectively. The following additional events occurred during the month.
1. Purchased additional raw materials of $45,000 on account.
2. Incurred factory labor costs of $33,500. Of this amount, $7,500 related to employer
payroll taxes.
3. Incurred manufacturing overhead costs as follows: indirect materials $10,000; indirect
labor $9,500; depreciation expense on equipment $12,000; and various other manufac-
turing overhead costs on account $11,000.
4. Assigned direct materials and direct labor to jobs as follows.

Job No. Direct Materials Direct Labor

25 $ 5,000 $ 3,000
26 17,000 12,000
27 13,000 9,000
5. The company uses direct labor hours as the activity base to assign overhead. Direct
labor hours incurred on each job were as follows: Job No. 25, 200; Job No. 26, 800; and
Job No. 27, 600.
Instructions
(a) Calculate the predetermined overhead rate for the year 2014, assuming Pedriani Com-
pany estimates total manufacturing overhead costs of $440,000, direct labor costs of
$300,000, and direct labor hours of 20,000 for the year.
(b) Open job cost sheets for Jobs 25, 26, and 27. Enter the January 1 balances on the job
cost sheet for Job No. 25.
(c) Prepare the journal entries to record the purchase of raw materials, the factory labor costs
incurred, and the manufacturing overhead costs incurred during the month of January.
(d) Prepare the journal entries to record the assignment of direct materials, direct labor, and
manufacturing overhead costs to production. In assigning manufacturing overhead costs,
use the overhead rate calculated in (a). Post all costs to the job cost sheets as necessary.
(e) Total the job cost sheets for any job(s) completed during the month. Prepare the jour- (e) Job 25, $37,400
nal entry (or entries) to record the completion of any job(s) during the month. Job 26, $46,600
(f) Prepare the journal entry (or entries) to record the sale of any job(s) during the month.
(g) What is the balance in the Work in Process Inventory account at the end of the month?
What does this balance consist of?
(h) What is the amount of over- or underapplied overhead?
86 2 Job Order Costing

Prepare entries in a job order P2-2B For the year ended December 31, 2014, the job cost sheets of Dosey Company con-
cost system and partial income tained the following data.
statement.
Job Direct Direct Manufacturing Total
(LO 2, 3, 4, 5, 6), AN Number Explanation Materials Labor Overhead Costs
7650 Balance 1/1 $18,000 $20,000 $25,000 $ 63,000
Current year’s costs 32,000 36,000 45,000 113,000
7651 Balance 1/1 12,000 16,000 20,000 48,000
Current year’s costs 30,000 40,000 50,000 120,000
7652 Current year’s costs 35,000 68,000 85,000 188,000
Other data:
1. Raw materials inventory totaled $20,000 on January 1. During the year, $100,000 of raw
materials were purchased on account.
2. Finished goods on January 1 consisted of Job No. 7648 for $93,000 and Job No. 7649
for $62,000.
3. Job No. 7650 and Job No. 7651 were completed during the year.
4. Job Nos. 7648, 7649, and 7650 were sold on account for $490,000.
5. Manufacturing overhead incurred on account totaled $135,000.
6. Other manufacturing overhead consisted of indirect materials $12,000, indirect labor
$16,000, and depreciation on factory machinery $19,500.
Instructions
(a) (1) $111,000 (a) Prove the agreement of Work in Process Inventory with job cost sheets pertaining to
(4) $180,000 unfinished work. (Hint: Use a single T-account for Work in Process Inventory.) Calcu-
Unfinished job 7652, late each of the following, then post each to the T-account: (1) beginning balance, (2)
$188,000 direct materials, (3) direct labor, (4) manufacturing overhead, and (5) completed jobs.
(b) Amount 5 $2,500 (b) Prepare the adjusting entry for manufacturing overhead, assuming the balance is
allocated entirely to cost of goods sold.
(c) $156,500 (c) Determine the gross profit to be reported for 2014.
Prepare entries in a job order P2-3B Robert Perez is a contractor specializing in custom-built jacuzzis. On May 1, 2014,
cost system and cost of goods his ledger contains the following data.
manufactured schedule.
Raw Materials Inventory $30,000
(LO 2, 3, 4, 5), AP Work in Process Inventory 12,200
Manufacturing Overhead 2,500 (dr.)
The Manufacturing Overhead account has debit totals of $12,500 and credit totals of
$10,000. Subsidiary data for Work in Process Inventory on May 1 include:
Job Cost Sheets
Job Manufacturing
by Customer Direct Materials Direct Labor Overhead
Stiner $2,500 $2,000 $1,400
Alton 2,000 1,200 840
Herman 900 800 560
$5,400 $4,000 $2,800
During May, the following costs were incurred: raw materials purchased on account
$4,000, labor paid $7,000, and manufacturing overhead paid $1,400.
A summary of materials requisition slips and time tickets for the month of May reveals
the following.
Job by Customer Materials Requisition Slips Time Tickets
Stiner $ 500 $ 400
Alton 600 1,000
Herman 2,300 1,300
Smith 1,900 2,300
5,300 5,000
General use 1,500 2,000
$6,800 $7,000
 Problems: Set B 87

Overhead was charged to jobs on the basis of $0.70 per dollar of direct labor cost. The
jacuzzis for customers Stiner, Alton, and Herman were completed during May. The three
jacuzzis were sold for a total of $36,000.
Instructions
(a) Prepare journal entries for the May transactions: (i) for purchase of raw materials, fac-
tory labor costs incurred, and manufacturing overhead costs incurred; (ii) assignment
of raw materials, labor, and overhead to production; and (iii) completion of jobs and
sale of goods.
(b) Post the entries to Work in Process Inventory.
(c) Reconcile the balance in Work in Process Inventory with the costs of unfinished
jobs. (d) Cost of goods
(d) Prepare a cost of goods manufactured schedule for May. manufactured $20,190
P2-4B Net Play Company uses a job order cost system in each of its three manufacturing Compute predetermined
departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in overhead rates, apply
Department A, direct labor hours in Department B, and machine hours in Department C. overhead, and calculate
In establishing the predetermined overhead rates for 2014, the following estimates under- or overapplied
were made for the year. overhead.
(LO 4, 6), AP
Department
A B C
Manufacturing overhead $720,000 $640,000 $900,000
Direct labor cost $600,000 $100,000 $600,000
Direct labor hours 50,000 40,000 40,000
Machine hours 100,000 120,000 150,000

During January, the job cost sheets showed the following costs and production data.
Department
A B C
Direct materials used $92,000 $86,000 $64,000
Direct labor cost $48,000 $35,000 $50,400
Manufacturing overhead incurred $60,000 $60,000 $72,100
Direct labor hours 4,000 3,500 4,200
Machine hours 8,000 10,500 12,600

Instructions (a) 120%, $16, $6

(a) Compute the predetermined overhead rate for each department. (b) $197,600, $177,000,
(b) Compute the total manufacturing costs assigned to jobs in January in each department. $190,000
(c) Compute the under- or overapplied overhead for each department at January 31. (c) $2,400 $4,000, $(3,500)
P2-5B Bell Company’s fiscal year ends on June 30. The following accounts are found in its Analyze manufacturing
job order cost accounting system for the first month of the new fiscal year. accounts and determine
missing amounts.
Raw Materials Inventory (LO 2, 3, 4, 5, 6), AN
July 1 Beginning balance 19,000 July 31 Requisitions (a)
31 Purchases 90,400
July 31 Ending balance (b)
Work in Process Inventory
July 1 Beginning balance (c) July 31 Jobs completed (f)
31 Direct materials 80,000
31 Direct labor (d)
31 Overhead (e)
July 31 Ending balance (g)
Finished Goods Inventory
July 1 Beginning balance (h) July 31 Cost of goods sold (j)
31 Completed jobs (i)
July 31 Ending balance (k)