Dallol Technology & Business College

Date of Submission: June 30, 2022

Assignment 1 Course Title: Produce Job Costing Information
1. Write the Similarities & Differences between Job-Order and Process Costing
2. Explain the three categories of manufacturing costs.
3. is a document that summarizes all of the costs incurred on a specific job.
4. Suppose that a company estimates its factory overhead for the upcoming year as
$900,000. Assume that manufacturing overhead is applied to products on the basis of
machine hours of 600,000 hours. Assume further that a job cost sheet for job 243
included the following information:
Actual direct materials cost ----------------------------$ 2500

Actual direct labor cost --------------------------------- 3000

Actual machine hours ----------------------------------- 2000 hours

Required

A. Determine the overhead application rate

B. Compute the applied overhead to job 243

C. Prepare the entry to record applied overhead to job 243
D. Determine the total manufacturing costs of job 243.

1
Solution

a. Overhead application rate = Estimated Manufacturing Overhead

Budgeted machine hours

= 900,000

600,000

= $ 1.51 machine hour

b. Applied overhead = overhead rate x Actual activity base

= 1.50 x 2000

= $ 3000

c. Entry

Work in process -----------------------------------------3000

Manufacturing --------------------------------------------------------3000

d. Actual direct material cost ……………….. $ 2500

Actual direct labor cost …………………… 3000

Applied manufacturing overhead ………… 3000

Total manufacturing costs (Job 243) …….. $ 7500

2
Note that the applied manufacturing overhead is posted to job cost sheet.

Some accountants prefer to credit special departmental overhead applied account, instead of
directly crediting manufacturing overhead control account. i.e.

Work in process ………………………. 3000

Manufacturing overhead applied ………………. 3000

Then manufacturing overhead applied account is closed to manufacturing overhead control

account as follows:

Manufacturing overhead applied ………… 3000

Manufacturing overhead control ……………………. 3000

Assume that factory overhead incurred is $800.000 and that factory overhead applied is
$750.000. The difference is under applied of $50.000. The closing entry is:

Cost of Goods sold ……………………. 50.000

Manufacturing overhead control ……………………50.000

If the difference were over applied, the closing entry would be:

Manufacturing overhead control ………………… 50.000

Cost of Goods sold …………………………………………50.000