Chapter 17 Practice

Question 1

Newton Corporation uses a job order costing system and allocates manufacturing
overhead at a rate of $25 per machine hour. During the period, the company used
600 machine hours and actually incurred manufacturing overhead costs of $14,500.

(a) Prepare a summary journal entry to record total manufacturing overhead

allocated to jobs during the period. Omit the "$" sign in your response.

General Journal Debit Credit

Work in Process Inventory 15,000
Manufacturing Overhead 15,000

(b) Prepare a summary journal entry to record actual overhead costs incurred
during the period (make the credit portion of the entry to "Various Accounts").
Omit the "$" sign in your response.

General Journal Debit Credit

Manufacturing Overhead 14,500
Various Accounts 14,500

(c) Prepare the journal entry to close the Manufacturing Overhead account directly
to Cost of Goods Sold at the end of the period. Omit the "$" sign in your
response.

General Journal Debit Credit

Manufacturing Overhead 500
Cost of Goods Sold 500
Question 2

Mayfield Corporation finished job no. 314 on June 1. On June 10, the company sold job no.
314 for $10,000, cash. Total manufacturing costs allocated to this job at the time of the sale
amounted to $6,500.

(a) Record the transfer of job no. 314 from Work in Process to Finished Goods on June 1.
Omit the "$" sign in your response.

Date General Journal Debit Credit

6/1 Finished Goods Inventory 6,500
Work in Process Inventory 6,500

(b) Record the sale of job no. 314, and the transfer of its costs from Finished Goods, on June
10. Omit the "$" sign in your response.

Date General Journal Debit Credit

6/10 Cash 10,000
Sales 10,000

Cost of Goods Sold 6,500

Finished Goods Inventory 6,500

Question 4

Swanson Corporation applies manufacturing overhead to jobs at a rate of $30 per direct labor
hour. During the current period, actual overhead costs totaled $175,000, and 6,000 direct
labor hours were worked by the company's employees.

Required:

(a) Record the journal entry to close the Manufacturing Overhead account directly to Cost of
Goods Sold at the end of the period. Omit the "$" sign in your response.

General Journal Debit Credit

Manufacturing Overhead 5,000
Cost of Goods Sold 5,000

(b) Was manufacturing overhead overapplied, or was it underapplied? Omit the "$" sign in
your response.
 Overapplied by $ 5,000

Question 5

Indicate whether job order costing is appropriate for each of the following businesses.

a. Old Home Bakery, Inc. (a bakery

that produces to order). Appropriate
b. Baxter, Claxter, and Stone, CPAs. Appropriate
c. Thompson Construction Company. Appropriate
d. Satin Wall Paints, Inc. Not Appropriate
e. Apache Oil and Gas Refinery. Not Appropriate
f. Dr. Carr's Auto Body Shoppe. Appropriate
g. Health-Rite Vitamins. Not Appropriate
h. Shampoo Products International. Not Appropriate

Question 6

For each of the accounts listed below, prepare two summary journal entries. In the first entry,
illustrate a transaction that would cause the account to be debited. In the second entry, illustrate
a transaction that would cause the account to be credited. Assume that perpetual inventory
records are maintained.

(a) Materials Inventory Omit the "$" sign in your response.

General Journal Debit Credit

Materials Inventory XXX
Accounts Payable XXX

Work in Process Inventory XXX

Materials Inventory XXX
(b) Direct Labor Omit the "$" sign in your response.

General Journal Debit Credit

Direct Labor XXX
Cash XXX

Work in Process Inventory XXX

 Direct Labor XXX

(c) Manufacturing Overhead Omit the "$" sign in your response.

General Journal Debit Credit

Manufacturing Overhead XXX
Cash XXX

Work in Process Inventory XXX

Manufacturing Overhead XXX

(d) Finished Goods Inventory Omit the "$" sign in your response.

General Journal Debit Credit

Finished Goods Inventory XXX
Work in Process Inventory XXX

Cost of Goods Sold XXX

Finished Goods Inventory XXX

Question 7

(a) Production set-up costs

The number of set-ups required (or, perhaps, number of production runs)

(b) Heating costs

The square feet of production space occupied by each product line

(c) Machinery power costs

The total machine hours required to manufacture each product line

(d) Purchasing department costs

The number of purchase orders related to each product line

(e) Maintenance costs

The number of work orders related to each product line

 (f) Design and engineering costs

The number of design or engineering change orders

(g) Materials warehouse costs

The percent of total square feet in the materials warehouse occupied by each product line
(number of component parts per product line)

(h) Product inspection costs

The number of inspections related to each product line (rate of defects)

Question 14

Blue Plate Construction organized in December and recorded the following transactions during
its first month of operations:

Dec. 2 Purchased materials on account for $400,000.

Dec. 3 Used direct materials costing $100,000 on job no. 100.
Dec. 9 Used direct materials costing $150,000 on job no. 101.
Dec. 15 Used direct materials costing $30,000 on job no. 102.
Dec. 28 Applied the following direct labor costs to jobs: job no. 100, $9,000; job no. 101,
$11,000; job no. 102, $5,000.
Dec. 28 Applied manufacturing overhead to all jobs at a rate of 300% of direct labor dollars.
Completed and transferred job no. 100 and job no. 101 to the finished goods
Dec. 29 warehouse.
Dec. 30 Sold job no. 100 on account for $200,000.
Dec. 31 Recorded and paid actual December manufacturing overhead costs of $78,000, cash.
Dec. 31 Closed the Manufacturing Overhead account directly to Cost of Goods Sold.

(a) Record each of the above transactions as illustrated on pages 775-779. Omit the "$" sign
in your response.

Date General Journal Debit Credit

12/2 Materials Inventory 400,000
Accounts Payable 400,000

12/3 Work in Process Inventory 100,000

Materials Inventory 100,000

12/9 Work in Process Inventory 150,000

 Materials Inventory 150,000

12/15 Work in Process Inventory 30,000

Materials Inventory 30,000

12/28 Work in Process Inventory 25,000

Direct Labor 25,000

12/28 Work in Process Inventory 75,000

Manufacturing Overhead 75,000

12/29 Finished Goods Inventory 330,000

Work in Process Inventory 330,000

12/30 Accounts 200,000

Receivable Sales 200,000

Cost of Goods Sold 136,000

Finished Goods Inventory 136,000

12/31 Manufacturing 78,000

Overhead Cash 78,000

12/31 Cost of Goods Sold 3,000

Manufacturing Overhead 3,000