Job Order Costing Practice Problem 1

Davis Manufacturing, Inc.

1994 Manufacturing Overhead Budget

Insurance 42,000
Indirect Labor 100,000
Indirect Material 75,000
Factory Rent 120,000
Equipment Rent 50,000
Utilities 60,000
TOTAL 447,000

Budgeted number of DLH: 20,000

Budgeted machine hours: 60,000

If overhead is applied based on direct labor hours, what is the predetermined overhead rate for
1994?

If overhead is applied based on machine hours, what is the predetermined overhead rate for
1994?

If we pay our workers $9/hour and overhead is applied based on direct labor dollars, what is the
predetermined overhead rate for 1994?

Assume that Davis Manufacturing applies overhead based on direct labor hours. Job 1356
yielded 1500 units and was completed in 200 direct labor hours. Direct material costs for the job
totals $10,575. Calculate the unit cost for Job 1356.

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 Job Order Costing Practice Problem 2

The following data has been collected for Department 203 for 1993.

Work in process as of 1/1/93:

Job No. Material Labor Overhead Total

1376 $ 17,500 $ 22,000 $ 33,000 $ 72,500

Actual costs incurred by Department 203 during 1993:

By Job:

1376 $ 1,000 $ 7,000 $ 8,000

1377 26,000 53,000 79,000
1378 12,000 9,000 21,000
1379 4,000 1,000 5,000
TOTAL $ 43,000 $ 70,000

Not incurred by job:

Indirect Materials $ 15,000

Indirect Labor 53,000
Employee Benefits 23,000
Depreciation 12,000
Supervision 20,000
TOTAL $123,000

Department 203 Overhead Budget for 1993:

Indirect Materials $ 16,000

Indirect Labor 56,000
Employee Benefits 24,000
Supervision 20,000
Depreciation 12,000
TOTAL $128,000

Budgeted Direct Labor Dollars $ 80,000

Balances at 12/31/93, before disposition of over/under applied overhead:

Finished Goods Inventory $106,000
Cost of Goods Sold 852,000

Overhead is applied based on direct labor dollars.

Use this information to complete the questions on the following page.

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1. What is the predetermined overhead rate for 1993 for Department 203?

2. Apply overhead to each of the jobs worked on in 1993.

3. Jobs 1376 and 1377 were completed during 1993. The jobs yielded 5,000 and 3,000
units of product, respectively. What was the unit cost for each of these products?

4. What is the value of work in process inventory on 12/31/93? What jobs are included?

5. Was overhead over- or underapplied for 1993 in Department 203? By how much?

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 Job Order Costing Practice Problem 3

At the beginning of the current year, Maple Products had the following inventory amounts on its
balance sheet:
Raw materials $12,000
Work in process 20,000
Finished goods 35,000

Maple Products estimated that it would incur $60,000 in manufacturing overhead during the year,
and that it would operate at a level of 15,000 direct labor hours. During the current year, the
following transactions were completed:

A. Purchased raw material on account, $8,000.

B. Raw materials were issued to production, $16,000. 90% of these materials were direct,
and 10% were indirect.
C. Factory payrolls were paid, $49,000. 80% of the factory payroll was direct labor, and
20% was indirect labor. 14,000 direct labor hours were worked.
D. Administrative payrolls were paid, $12,00. Sales payrolls were paid, $10,000.
E. Depreciation on factory equipment, $8,000.
F. Factory utilities paid, $7,000.
G. Various administrative expenses incurred and paid, $20,000
H. Various selling expenses incurred and paid, $15,000.
I. Various manufacturing overhead costs incurred and paid (other than those indicated
above), $30,000.
J. Manufacturing overhead was applied to production.
K. Completed production for the current year, $106,600.
L. Sales to customers for the current year were:
Selling price $160,000
Cost ?
(Ending finished goods inventory, $21,600)

Required:

1. Prepare T-accounts for Raw Materials, FOH, Work in Process, Finished Goods, and Cost
of Goods Sold. Post the appropriate parts of your journal entries to these T-accounts to
determine the ending balance in each account. (Don't forget to enter the opening
balances in the inventory accounts.)

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 Job Order Costing Practice Problem 4

Estimated cost and operating data for the forthcoming period for three companies are given
below:

Company A Company B Company C

Direct labor hours 12,000 15,000 20,000
Manufacturing overhead $90,000 $120,000 $150,000
Machine hours 20,000 20,000 25,000
Direct labor cost $60,000 $ 75,000 $100,000

Predetermined OH Direct Labor Direct Labor Machine

rates are based on hours cost hours

Required:

1. Compute the predetermined overhead rate to be used in the forthcoming period for each
company.
2. Assume for Company B that $80,000 of direct labor cost actually is incurred. How much
overhead will be applied to work in process?
3. Assume for Company C that 30,000 machine hours are actually worked during the
forthcoming period. How much overhead will be applied to work in process? If actual
overhead costs total $175,000 will overhead be over- or under-applied? By how much?

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 Job Order Costing Practice Problem 5

The Carter Company began operations on January 2, 19x5. The following activity took place in
the work in process account for the month of January:

Work in Progress
Direct materials 10,000 To finished goods 79,000
Direct labor 30,000
Manufacturing OH 45,000

The Carter Company uses a job order costing system, and applies manufacturing overhead to
work in process on a basis of direct labor cost. At the end of January, only one job was still in
process. This job (Job 15) has been charged with $2,000 in direct materials cost.

Required:

Complete the following job cost sheet for partially completed Job 15:

Job Cost Sheet-Job 15 (as of January 31, 19x5)

Direct materials $

Direct labor $

Manufacturing overhead $

Total cost to January 31 $

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 Job Order Costing Practice Problem 6

Selected ledger accounts of the Barnaby Company are given below for the year 19x8:

Raw materials inventory Manufacturing overhead

Jan 1 15,000 19x8 credits ? 19x8 debits 74,000 19x8 credits ?
19x8 debits 50,000
Dec 31 12,000

Work in Process Factory wages payable

Jan 1 35,000 19x8 credits 19x8 debits 67,000 Jan 1 4,000
DM 48,000 188,000 19x8 credits 66,000
DL 60,000
OH 75,000
Dec 31 ?

Finished Goods Cost of Goods Sold

Jan 1 60,000 19x8 credits ? 19x8 debits ?
19x8 debits ?
Dec 31 48,000

Required:

1. What was the actual manufacturing overhead cost incurred during 19x8?
2. How much of the actual manufacturing overhead in part (1) consisted of indirect
materials?
3. How much of the actual manufacturing overhead in part (1) consisted of indirect labor?
4. What was the cost of goods manufactured for 19x8?
5. What was the cost of goods sold for 19x8?
6. If overhead is applied to production on a basis of direct labor cost, what rate was in
effect for 19x8?
7. Was manufacturing overhead over- or under-applied for 19x8? By how much?

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 Job Order Costing Practice Problem 7

Alex Company uses a job order cost system. The company uses predetermined overhead rates,
based on direct labor hours, in applying manufacturing overhead to jobs. Estimated cost and
operating data for 1994 are given below:

Estimated direct labor hours 30,000

Estimated direct labor cost $ 90,000
Estimated manufacturing overhead $ 120,000

At the end of 1994, Alex Company’s cost records revealed the following actual cost and
operating data:

Direct labor hours 32,000

Direct labor cost $ 68,000
Manufacturing overhead $ 130,000
Raw materials inventory $ 8,000
Work in process inventory $ 25,000
Finished goods inventory $ 50,000
Cost of goods sold $ 175,000

REQUIRED

1. Compute Alex Company’s predetermined overhead rate for 1994.

2. Compute the underapplied or overapplied manufacturing overhead for 1994.

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