Job Costing Questions

1.
Drop Anchor takes special orders to manufacture sail boats for high end customers. Complete the job cost sheets
for Drop Anchor for September based on the following information. Prepare journal entries to record the
transactions as well as post to the job cost sheets.
a. Purchased raw materials on credit, #145,000.
b. Materials requisitions: Job 240, #48,000; Job 241, #36,000; Job 242, #42,000; indirect
materials were #12,000.
c. Time tickets used to charge labor to jobs: Job 240, $40,000; Job 241, $30,000; Job 242,
#35,000, indirect labor is #25,000.
d. The company incurred the following additional overhead costs: depreciation of factory
building, #70,000; depreciation of factory equipment, $60,000; expired factory
insurance,
10,000; utilities and maintenance cost of #20,000 were paid in cash.
e. Applied overhead to all three jobs. The predetermined overhead rate is 190% of direct
labor cost.
f. Transferred jobs 240 and 242 to Finished Goods Inventory.
g. Sold job 240 for #300,000 for cash.
h. Closed the under- or over-applied overhead account balance.
Required: Compute for the total costs of Job 240, 241 and 242.
Job Cost Sheets

240 241 242 Total
For the current month
Direct materials
Direct labor
Applied overhead
Total costs
Answer:
a. Raw Materials Inventory ..................................................... 145,000

Accounts Payable .................................................... 145,000
b. Work in Process Inventory .................................................. 126,000

Raw Materials Inventory......................................... 126,000
Factory 12,000
Overhead................................................................ 12,000
Raw Materials Inventory.........................................
c. Work in Process Inventory .................................................. 105,000

Factory Wages Payable 105,000
.......................................... Factory 25,000
Overhead................................................................ 25,000
Factory Wages Payable ..........................................
d. Factory Overhead................................................................ 160,000
Accumulated Depreciation—Factory Building....... 70,000
Accumulated Depreciation—Factory Equip. .......... 60,000
Prepaid Insurance................................................... 10,000
Cash ........................................................................ 20,000
e. Work in Process Inventory .................................................. 199,500

Factory Overhead ($105,000 * 190%)................... 199,500
f. Finished Goods Inventory ($164,000 + $143,500) 307,500

............. Work in Process Inventory 307,500
......................................
g. Cash….………………………………………………. 300,000
Sales ........................................................................ 300,000
Cost of Goods Sold .............................................................. 164,000
Finished Goods Inventory ....................................... 164,000
h. Factory Overhead................................................................ 2,500

Cost of Goods Sold.................................................. 2,500
Overhead = #12,000 + 25,000 + 160,000 = #197,000
Overhead applied = 199,500
Overapplied overhead = # 2,500
Job Cost Sheets

240 241 242 Total
For the current month
Direct materials 48,000 36,000 42,000 126,000
Direct labor 40,000 30,000 35,000 105,000
Applied overhead 76,000 57,000 66,500 199,500
Total costs 164,000 123,000 143,500 430,500
2.
The following calendar year information about the Tchulahota Corporation is available on
December 31:
Advertising expense…………………………… #28,800

Depreciation of factory equipment…………… 42,320
Depreciation of office equipment…………….. 10,800
Direct labor…………………………………… 142,600
Factory utilities………………………………... 35,650
Interest expense………………………………... 6,650
Inventories, January 1:
Raw materials…………………………… 3,450
Work in Process………………………… 17,250
Finished goods…………………………... 35,600
Inventories, December 31:
Raw materials…………………………….. 2,300
Work in Process………………………….. 20,700
Finished goods…………………………… 31,050
Raw materials purchases……………………… 132,450
Rent on factory building……………………… 41,400
Indirect labor………………………………….. 51,750
Sales commissions…………………………….. 16,500
The company applies overhead on the basis of 125% of direct labor costs. Calculate the
amount of over- or underapplied overhead.
Answer: Factory overhead costs:

Depreciation of factory equipment …………… # 42,320
Factory utilities ……………………………….. 35,650
Rent on factory building ……………………… 41,400
Indirect labor ………………………………….. 51,750
Total actual factory overhead costs ………….. #171,120
Factory overhead applied (142,600 * 125%) … #178,250
Overapplied overhead ………………………… # 7,130
3. The work in process account of Meyers Company showed:
Work in Process
Materials #22,000 | Finished goods #68,000
Direct labor 37,000 |
Factory overhead 55,500 |
Materials charged to the one job still in process amounted to #5,000. Factory overhead is applied as a
predetermined percentage of direct labor cost.
Compute the following (1) the amount of direct labor cost in finished goods and (2) the amount of factory
overhead in finished goods.
SOLUTION
(1) The amount of direct labor in finished goods:

Finished goods............................................................................................................................. #68,000
Materials included in finished goods........................................................................................ 17,000
Direct labor and factory overhead in finished goods.............................................................. #51,000
Let xFactory
= directoverhead
labor incharged
finishedtogoods
work in progress
2.5x------------------------------------------------------
= $51,000 direct labor and factory overhead= in finished goods= 1.5
#55000/#37000
xdirect
= $20,400
labordirect
chargedlabor in finished
to work goods
in progress
(2) The amount of factory overhead in finished goods:
x = #20,400
1.5x = 1.5(#20,400)
1.5
x= $30,600 factory overhead in finished goods
Cost & Managerial Accounting I Essentials

By William Keller

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1.

Job Cost Sheets

a. Raw Materials Inventory ..................................................... 145,000

b. Work in Process Inventory .................................................. 126,000

c. Work in Process Inventory .................................................. 105,000

e. Work in Process Inventory .................................................. 199,500

f. Finished Goods Inventory ($164,000 + $143,500) 307,500

h. Factory Overhead................................................................ 2,500

Job Cost Sheets

Total costs 164,000 123,000 143,500 430,500

Advertising expense…………………………… #28,800

Answer: Factory overhead costs:

3. The work in process account of Meyers Company showed:

(1) The amount of direct labor in finished goods:

(2) The amount of factory overhead in finished goods:

Cost & Managerial Accounting I Essentials

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