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Chapter 17: 17-1SE-i (page 938)
Distinguishing between job order costing and process costing
Would the following companies most likely use job order costing or process costing?
i. A manufacturer of multivitamins
A manufacturer of multivitamins is most likely to use process costing system.
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June production generated the following activity in Bentley Chassis Company’s Work-in-Process Inventory account:
June 1 balance | \(36,000 |
Direct materials used | 32,000 |
Direct labor assigned to jobs | 40,000 |
Manufacturing overhead allocated to jobs | 28,000 |
Additionally, Bentley Chassis has completed Jobs 142 and 143, with total costs of
\)37,000 and \(48,000, respectively.
Requirements
3. Prepare the journal entry to record the sale on account of Job 143 for \)63,000.
Also, prepare the journal entry to record Cost of Goods Sold for Job 143.
Explain the terms accumulate, assign, allocate, and adjust as they apply to job order costing.
Question: Using job order costing in a service company
Roth Accounting pays Jack Smith $90,000 per year.
Requirements
1. What is the hourly cost to Roth Accounting of employing Smith? Assume a
30-hour week and a 50-week year.
Young Foundry uses a predetermined overhead allocation rate to allocate overhead to individual jobs, based on the machine hours required. At the beginning of 2018, the company expected to incur the following:
Manufacturing overhead costs | \(840,000 |
Direct labor cost | 1,480,000 |
Machine hours | 70,000 hours |
At the end of 2018, the company had actually incurred:
Direct labor cost | \)1,230,000 |
Depreciation on manufacturing plant and equipment | 620,000 |
Property taxes on plant | 35,500 |
Sales salaries | 26,000 |
Delivery driver’s wages | 22,500 |
Plant janitor’s wages | 17,000 |
Machine hours | 60,000 hours |
Requirements
4. Prepare the journal entry to adjust for the underallocated or overallocated manufacturing overhead. Does your entry increase or decrease Cost of Goods Sold?
The manufacturing records for Sporty Kayaks at the end of the 2018 fiscal year show the following information about manufacturing overhead:
Overhead allocated to production | \(409,200 |
Actual manufacturing overhead cost | 432,000 |
Predetermined overhead allocation rate | \)44 per machine hours |
Requirements
3. Prepare the journal entry to adjust for the underallocated or overallocated manufacturing overhead.
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