ACCT 331

Exercise Chapter 4 – Job Order Costing

Problem 1

Job Order Costing

Mid Town Furniture uses job order costing systems and has the following information:

Total budgeted maufacturing overhead for the year = $300,000

Total budgeted direct labor hour = 15,000 hours.

Job Direct Labor

Number Direct Material Direct Labor Hour
A 13 $ 600 $ 450 8 hours
A 14 $ 500 $ 350 6 hours
A 15 $ 200 $ 150 4 hours

Required:
1. Determine the total costs of each job.
2. At the end of the year, the actual direct labor hours were 15,500 in total and the actual
manufacturing overhead was $320,000. Determine if manufacturing overhead was
underapplied or overapplied.
3. Prepare the required journal entry to dispose the overhead variance, assuming that the
variance is small.
ACCT 331

Exercise Chapter 4 – Job Order Costing

Problem 2

Reed Incorporated uses a job-order costing system and a predetermined overhead rate based on machine
hours.

At the beginning of the year, the company estimated manufacturing overhead for the year would be
$240,000 and machine hours would be 8,000.

The following information pertains to December of the current year:

Job 10 Job 11 Job 12 Total

Work-in-process, Dec. 1 $16,000 $26,000 $38,000 $80,000

December production activity:

Materials used $4,000 $4,800 $7,200 $16,000
Direct labor cost $2,400 $3,600 $4,000 $10,000
Machine hours 400 700 900 2,000

Actual manufacturing overhead cost incurred in December was $61,000.

Required:

a. Compute the predetermined overhead application rate.

b. Determine the total cost associated with each job.

c. If jobs 10 and 12 were completed, prepared the journal entry to move the cost.

d. If job 10 was delivered to customers that paid $50,000 cash, prepare the journal entries.
What is the gross profit for job 10?

e. What is the cost assigned to ending work in process?

f. What is the cost assigned to ending finished goods?

g. How much was overhead over/underapplied?