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Exam 19: Job Order Cost Accounting

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Question 21

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There are two basic types of cost accounting systems: job order costing and periodic costing.

A) True
B) False

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Question 22

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Under a job order cost accounting system, individual jobs are always charged with actual overhead costs when they are transferred to finished goods.

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B) False

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Question 23

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The following data relates to the Density Company's first operating period. Calculate the total cost of goods sold for each product.

Plumley Ad Agency contracted with a company to prepare an ad campaign. Plumley uses a job order costing system. Plumley estimates that the job will take 145 designer hours at $90 per hour and 85 staff hours at $45 per hour. Plumley uses two overhead rates in applying overhead to jobs: Designer-related at $100 per designer hour and staff-related at $50 per staff hour. Determine the total estimated cost for this job.

Bard Manufacturing uses a job order cost accounting system. During one month Bard purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Bard incurred a factory payroll of $150,000, paid in cash, of which $40,000 is classified as indirect labor. Bard uses a predetermined overhead application rate of 150% of direct labor cost. The journal entry to record the issuance of materials to production is:

A company that produces a large number of standardized units would normally use a job order cost accounting system.

Medlar Corp. maintains a Web-based general ledger. Overhead is applied on the basis of direct labor costs. Its bookkeeper accidentally deleted most of the entries that had been recorded for January. A printout of the general ledger (in T-account form) showed the following: A review of the prior year's financial statements, the current year's budget, and January's source documents produced the following information: (1) Accounts Payable is used for raw material purchases only. January purchases were $49,000. (2) Factory overhead costs for January were $17,000 none of which is indirect materials. (3) The January 1 balance for finished goods inventory was $10,000. (4) There was a single job in process at January 31 with a cost of $2,000 for direct materials and $1,500 for direct labor. (5) Total cost of goods manufactured for January was $90,000. (6) All direct laborers earn the same rate ($13/hour). During January, 2,500 direct labor hours were worked. (7) The predetermined overhead allocation rate is based on direct labor costs. Budgeted (expected) overhead for the year is $195,000 and budgeted (expected) direct labor is $390,000. Fill in the missing amounts a through o above in the T-accounts above.

Describe the flow of labor costs in a job order costing system, and identify the documents used in the system.

Hancock Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Hancock estimated total overhead of $396,000; materials of $410,000 and direct labor of $220,000. During the year Hancock incurred $418,000 in materials costs, $413,200 in overhead costs and $224,000 in direct labor costs. Compute the overhead application rate.

A company's overhead rate is 60% of direct labor cost. Using the following incomplete accounts, determine the cost of direct materials used.

Bard Manufacturing uses a job order cost accounting system. During one month Bard purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Bard incurred a factory payroll of $150,000, paid in cash, of which $40,000 is classified as indirect labor. Bard uses a predetermined overhead application rate of 150% of direct labor cost. The journal entry to record payment of the factory payroll is:

BC Company uses a job order cost accounting system. During the month of April, the following events occurred: (a) Purchased raw materials on credit, $32,000. (b) Raw materials requisitioned: $25,800 as direct materials and $10,500 indirect materials. (c) Paid factory payroll for the month totaling $37,700 which includes $8,200 indirect labor. (d) Assigned the factory payroll to jobs and overhead. Make the necessary journal entries to record the above transactions and events.

A ___________________________________ is calculated by relating total estimated factory overhead to an allocation factor such as total estimated direct labor cost, and is used to allocate factory overhead to specific jobs.

A document in a job order cost accounting system that is used to record the costs of producing a job is a(n) :

A clock card is a source document that an employee uses to report how much time was spent working on a job or on overhead and that is used to determine the amount of direct labor to charge to the job or to determine the amount of indirect labor to charge to factory overhead.

A clock card is a source document used by an employee to record the total number of hours worked and serves as a source document for entries to record labor costs.

Overapplied overhead is the amount by which overhead applied to jobs using the predetermined overhead allocation rate exceeds the overhead incurred during a period.

A company that uses a job order cost accounting system would make the following entry to record the flow of direct materials into production:

Bard Manufacturing uses a job order cost accounting system. During one month Bard purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Bard incurred a factory payroll of $150,000, paid in cash, of which $40,000 is classified as indirect labor. Bard uses a predetermined overhead application rate of 150% of direct labor cost. Bard's beginning and ending Goods in Process Inventory are $15,500 and $27,000 respectively. Compute the cost of product transferred to Finished Goods Inventory:

A ______________________ accounting system records production activities using a periodic inventory system. A ____________________ accounting system records production activities using a perpetual inventory system.