Job Order Costing

1. Custom Metal Works produces castings and other metal parts to customer
specifications. The company uses a job-order costing system and applies
overhead costs to jobs on the basis of machine hours. At the beginning of the
year, the company made the following estimates:
a. Machine hours to support the estimated production: 150000
b. Fixed manufacturing overhead cost $85000
c. Variable MOH cost= $3/Machine hour
d. Direct Wage Rate $16/hour
e. Idle Time 10 Hours (Idle time should be treated as manufacturing
Overhead)
The company had no work in process at the beginning of the year. The
company spent the entire month of January working on one large orderJob
382, which was an order for 8,000 machined parts. Cost data for January
follow:
a. Raw materials purchased on account, $315,000.
b. Raw materials requisitioned for production, $270,000 (80% direct and
20% indirect).
c. Labor cost incurred in the factory, $190,000, of which $80,000 was
direct labor and $110,000 was indirect labor.
d. Depreciation recorded on factory equipment, $63,000.
e. Other manufacturing overhead costs incurred, $85,000 (credit
Accounts Payable).
f. Manufacturing overhead cost was applied to production on the basis of
40,000 machine-hours actually worked during January.
g. The completed job was moved into the finished goods warehouse on
January 31 to await delivery to the customer. (In computing the dollar
amount for this entry, remember that the cost of a completed job
consists of direct materials, direct labor, and applied overhead.)
Required:
1. Prepare journal entries to record items (a) through (f) above. Ignore
item (g) for the moment.
2. Prepare T-accounts for Manufacturing Overhead and Work in
Process. Post the relevant items from your journal entries to these
T-accounts.
3. Prepare a journal entry for item (g) above.
4. Compute the unit product cost that will appear on the job cost sheet
for Job 382.
Additional:
During the year the company worked a total of 160000 machine hours
on all jobs and incurred actual manufacturing cost of $640000. What is
the amount of over applied/under applied Manufacturing cost? Dispose
of the MOH variance to

a. Cost of Goods Sold

b. WIP, Finished Goods and CGS

2. PROBLEM 328 Cost Flows; T-Accounts; Income Statement (Mixed with

Problem 3.25)
Fantastic Props, Inc. designs and fabricates movie props such as mock-ups of
star-fighters and cybernetic robots. The companys balance sheet as of
January 1, the beginning of the current year, appears below:

Because each prop is a unique design and may require anything from a few
hours to a month or more to complete, Fantastic Props uses a job-order
costing system. Overhead in the fabrication shop is charged to props on the
basis of direct labor cost. The companys predetermined overhead rate for
the year is based on a cost formula that estimated $80,000 in manufacturing
overhead for an estimated allocation base of $100,000 direct labor dollars.
The following transactions were recorded during the year:
a. Raw materials, such as wood, paints, and metal sheeting, were
purchased on account, $80,000.
b. Raw materials were issued to production, $90,000; $5,000 of this
amount was for indirect materials.
c. Costs for salaries and wages were incurred as follows:
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . $216,000
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . $90,000
Selling and administrative salaries . . . . . . . . . . $145,000
d. Fabrication shop utilities costs incurred, $12,000.
e. Depreciation recorded for the year, $50,000 (90% relates to factory
assets, and the remainder relates to selling and administrative assets).

f.
g.
h.
i.
j.
k.
l.
m.

Prepaid insurance expired, $4,800 ($4,000 related to fabrication shop

operations, and $800related to selling and administrative activities).
Shipping expenses incurred, $40,000.
Other manufacturing overhead costs incurred, $17,000 (credit
Accounts Payable).
Manufacturing overhead was applied to production. Overhead is
applied on the basis of direct labor cost.
Movie props that cost $310,000 to produce according to their job cost
sheets were completed.
Sales for the year totaled $450,000 and were all on account. The total
cost to produce these movie props was $300,000 according to their job
cost sheets.
Collections on account from customers, $445,000.
Payments on account to suppliers, $150,000.

Required:
1. Prepare a T-account for each account on the companys balance sheet,
and enter the beginning balances.
2. Make entries directly into the T-accounts for transactions (a) through
(m). Create new T-accounts as needed. Determine an ending balance
for each T-account.
3. Was manufacturing overhead underapplied or overapplied for the
year? Assume that the company allocates any overhead balance
between the Work in Process, Finished Goods, and Cost of Goods Sold
accounts. Prepare a journal entry to show the allocation. (Round
allocation percentages to one decimal place.)
4. Prepare an income statement for the year. Prepare a schedule of cost
of goods manufactured though all of the information needed for the
income statement is available in the T-accounts.

Process Costing
1. A Chocolate manufacturing company produces chocolate bars. Raw materials
are added at the beginning of the production process. Labor and Overhead
Cost are incurred evenly throughout the process. Information on the no. of
units that were processed and cost incurred during November 2005 are as
follows:
Beginning Inventory (30% completed as to conversion 12000 unit
cards (Chocolate ban)
Started during current period: 115500 units
Cards completed: 120700 units
Ending Inventory (80% completed as to conversion): 6800 units
Cost of Beginning Inventory (November 1, 2005):

Direct Material: $48000

Conversion: $4678.6

Current Period Costs (During November 2005)

Direct Material: $334950

Conversion Cost: $202191

Required:
Prepare production cost report according to the weighted average method.

2. Exercise

411 Equivalent Units and Cost per Equivalent UnitWeightedAverage Method: With some modification in the percentage of completion
in the beginning and ending inventory.

Solex Company produces a high-quality insulation material that passes

through two production processes. Data for June for the first process follow:
Particulars

Work in process inventory,

June 1
Work in process inventory,
June 30
Materials cost in work in
process
Inventory, June 1
Conversion cost in work in
process

Units

Completion
with Respect
to Materials

60000

60%

Completio
n with
Respect
to
Conversio
n
55%

40000

72%

35%

Cost
$ 56,600.00

Inventory, June 1
Materials cost added during
June
Conversion cost added during
June
Units started into production
Units transferred to the next
process
Required:

$ 14,900.00
$ 385,000.00
$ 214,500.00
280000
300000

1. Assume that the company uses the weighted-average method of

accounting for units and costs. Determine the equivalent units for June
for the first process.
2. Compute the costs per equivalent unit for June for the first process.
3. Determine the total cost of ending work in process inventory and the
total cost of units transferred to the next process in June.

3. Problem

417 Comprehensive Problem; Second Production Department

Weighted-Average Method with some modification in ending inventory and
cost added during April

Bohemian Links Inc. produces sausages in three production departments

Mixing, Casing and Curing, and Packaging. In the Mixing Department, meats
are prepared and ground and then mixed with spices. The spiced meat
mixture is then transferred to the Casing and Curing Department, where the
mixture is force-fed into casings and then hung and cured in climatecontrolled smoking chambers. In the Packaging Department, the cured
sausages are sorted, packed, and labeled. The company uses the weightedaverage method in its process costing system. Data for April for the Casing
and Curing Department follow:
Particulars
Work in process inventory,
April 1
Work in process inventory,
April 30

Percent Completed
Mixin Materi Convers
Units
g
als
ion
1

100%

60%

50%

100%

30%

15%

Mixin Materi Convers

g
als
ion
Work in process inventory,
$1,64
$26
$105
April 1
0
$8400
Cost added during April
$10500 $70000
0
Mixing cost represents the costs of the spiced meat mixture transferred in
from the Mixing Department. The spiced meat mixture is processed in the
Casing and Curing Department in batches; each unit in the above table is a
batch, and one batch of spiced meat mixture produces a set amount of
sausages that are passed on to the Packaging Department. During April, 60

batches (i.e., units) were completed and transferred to the Packaging

Department.
Required:
1. Determine the equivalent units for April for mixing, materials, and
conversion. Do not round off your computations.
2. Compute the costs per equivalent unit for April for mixing, materials,
and conversion.
3. Determine the total cost of ending work in process inventory and the
total cost of units transferred to the Packaging Department in April.
4. Prepare a cost reconciliation report for the Casing and Curing
Department for April.

4. Blending Department:
Beginning Inventory- 3000 units
Units started during current period- 6000 units
Total Units completed and transferred out: 8000 units
DM
Conversion
Cost of Beginning Inventory
6000
4500
Current Period Cost
12000
21000
Bottling Department:
Beginning Inventory- 5000 units
Total units completed and transferred out- 11000 units
Blending
DM
Conv.
Cost of beginning inventory
$ 25000
$ 5000
$ 625
$ 30625
Cost added during current period
$ 8000
2375
$ 50375
Additional Information:
For Blending Department:
1. Raw Materials are added at the beginning of the process
2. Ending Inventory is 75% complete.
For Bottling Department:
1. Raw Materials are added evenly throughout the month
2. Ending Inventory is 60% completed.
Required:
Prepare Production Report for each department

Total
$