Job Order Cost Systems

Exercises

© 2015 McGraw-Hill Education

 Exercises – True or False
1. Manufacturing
. and service firms producing unique products or services require job-order
accounting systems.
2. The key feature of job-order costing is that the cost of one job differs from that of
another job and must be kept track of separately.
3. Production costs consist of direct materials, direct labor, and overhead.
4. The difference between actual overhead and applied overhead is called an overhead
variance.

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 1

Exercises – True or False
. overhead is greater than applied overhead, the variance is called underapplied
5. Ifactual
overhead.
6. Costs reported on the financial statements must be estimated costs.
7. In an actual cost system, actual direct materials, actual direct labor and estimated
overhead are used to determine unit cost.
8. A job-order cost sheet is the source document where direct labor costs are assigned to
individual jobs.
9. Using a time ticket, the cost accounting department can enter the cost of direct materials
onto the correct job-order cost sheet.

10. The work-in-process account consists of all the job-order cost sheets for the completed
jobs.

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 2

 11. There are other source documents besides the time ticket and the
material requisition form used to fill out the job-order cost sheet.

12. The raw materials account is an inventory account located on the

income statement.

13. The three manufacturing cost elements are direct materials, direct
labor, and overhead.

14. The use of normal costing means that actual overhead costs are
assigned directly to jobs.

15. Actual overhead is reconciled with applied overhead at the beginning

of the period.

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 3

 Exercises
Fill in the Blanks
.
1. Process Costing system 6. Underapplied overhead 11, Job-order cost sheet
2. Applied overhead 7. Job-order costing system 12. Materials requisition
3. Overhead variance 8. Time Ticket 13. Adjusted cost of goods sold
4. Pre-determined 9. Raw Materials, work in 14. Work in process
overhead rate process
5. Plant-wide overhead 10. Normal cost of goods 15. Cost of goods sold, finished
1.
rate sold goods
In a _______________________________
Job Order costing costs are accumulated by job.
system

2.
. _________________is a costing system that accumulates production costs by process or by department
Process Costing
System
for a given period of time.
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 4
 Exercises
Fill
 .in the Blanks
1. Process Costing system
2. Applied overhead
3. Overhead variance
4. Pre-determined
overhead rate
5. Plant-wide overhead
rate
6. Underapplied overhead
7. Job-order costing system
8. Time Ticket
9. Raw Materials, work in
process
10. Normal cost of goods
sold
11, Job-order cost sheet
12. Materials requisition
13. Adjusted cost of goods sold
14. Work in process
15. Cost of goods sold, finished
goods

3. The ___________________________ is calculated at the beginning of the year by dividing the total
estimated annual overhead by the total estimated level of cost driver. Predetermined OH rate
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 5
 Exercises
Fill
 .in the Blanks
1. Process Costing system 6. Underapplied overhead 11, Job-order cost sheet
2. Applied overhead 7. Job-order costing system 12. Materials requisition
3. Overhead variance 8. Time Ticket 13. Adjusted cost of goods sold
4. Pre-determined 9. Raw Materials, work in 14. Work in process
overhead rate process
5. Plant-wide overhead 10. Normal cost of goods 15. Cost of goods sold, finished
rate sold goods
4. . _________________ is found by multiplying the predetermined overhead rate by the actual use of the
associated activity for the period. Applied Overhead

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 6

 Exercises
Fill
 .in the Blanks
1. Process Costing system
2. Applied overhead
3. Overhead variance
4. Pre-determined
overhead rate
5. Plant-wide overhead
rate
6. Underapplied overhead
7. Job-order costing system
8. Time Ticket
9. Raw Materials, work in
process
10. Normal cost of goods
sold
11, Job-order cost sheet
12. Materials requisition
13. Adjusted cost of goods sold
14. Work in process
15. Cost of goods sold, finished
goods

5 . The difference between actual overhead and applied overhead is called a (n) _________________.
Overhead Variance

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 7

 Exercises
Fill
 .in the Blanks
1. Process Costing system
2. Applied overhead
3. Overhead variance
4. Pre-determined
overhead rate
5. Plant-wide overhead
rate
6. Underapplied overhead
7. Job-order costing system
8. Time Ticket
9. Raw Materials, work in
process
10. Normal cost of goods
sold
11, Job-order cost sheet
12. Materials requisition
13. Adjusted cost of goods sold
14. Work in process
15. Cost of goods sold, finished
goods

6
1. If actual overhead is greater than applied overhead, then the variance is called ___________________.
Underapplied Overhead
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 8
 Exercises
Fill
 .in the Blanks
1. Process Costing system 6. Underapplied overhead 11, Job-order cost sheet
2. Applied overhead 7. Job-order costing system 12. Materials requisition
3. Overhead variance 8. Time Ticket 13. Adjusted cost of goods sold
4. Pre-determined 9. Raw Materials, work in 14. Work in process
overhead rate process
5. Plant-wide overhead 10. Normal cost of goods 15. Cost of goods sold, finished
rate sold goods
A _____________________ is a single overhead rate calculated by using all estimated overhead for a
7
factory divided by the estimated activity level across the entire factory. Plant-wide Overhead
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 9
 Exercises
Fill
 .in the Blanks
1. Process Costing system 6. Underapplied overhead 11, Job-order cost sheet
2. Applied overhead 7. Job-order costing system 12. Materials requisition
3. Overhead variance 8. Time Ticket 13. Adjusted cost of goods sold
4. Pre-determined 9. Raw Materials, work in 14. Work in process
overhead rate process
5. Plant-wide overhead 10. Normal cost of goods 15. Cost of goods sold, finished
rate sold goods
The _____________________ is subsidiary to the work-in-process account and is the primary document for
8
accumulating all costs related to a particular job. Job Order cost sheet

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 10

 Exercises
Fill
 .in the Blanks
1. Process Costing system 6. Underapplied overhead 11, Job-order cost sheet
2. Applied overhead 7. Job-order costing system 12. Materials requisition
3. Overhead variance 8. Time Ticket 13. Adjusted cost of goods sold
4. Pre-determined 9. Raw Materials, work in 14. Work in process
overhead rate process
5. Plant-wide overhead 10. Normal cost of goods 15. Cost of goods sold, finished
rate sold goods
A __________________________ is used by the cost accounting department to enter the cost of direct
9
materials onto the correct job-order cost sheet. Materials Requisition

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 11

 Exercises
Fill
 .in the Blanks
1. Process Costing system 6. Underapplied overhead 11, Job-order cost sheet
2. Applied overhead 7. Job-order costing system 12. Materials requisition
3. Overhead variance 8. Time Ticket 13. Adjusted cost of goods sold
4. Pre-determined 9. Raw Materials, work in 14. Work in process
overhead rate process
5. Plant-wide overhead 10. Normal cost of goods 15. Cost of goods sold, finished
rate sold goods
A source document by which direct labor costs are assigned to individual jobs is known as a
10
_______________. Time Ticket

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 12

 Exercises
Fill
 .in the Blanks
1. Process Costing system 6. Underapplied overhead 11, Job-order cost sheet
2. Applied overhead 7. Job-order costing system 12. Materials requisition
3. Overhead variance 8. Time Ticket 13. Adjusted cost of goods sold
4. Pre-determined 9. Raw Materials, work in 14. Work in process
overhead rate process
5. Plant-wide overhead 10. Normal cost of goods 15. Cost of goods sold, finished
rate sold goods

11 The cost of goods sold before an adjustment for an overhead variance is called ____________________.
Normal Cost of goods sold

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 13

 Exercises
Fill
 .in the Blanks
1. Process Costing system
2. Applied overhead
3. Overhead variance
4. Pre-determined
overhead rate
5. Plant-wide overhead
rate
6. Underapplied overhead
7. Job-order costing system
8. Time Ticket
9. Raw Materials, work in
process
10. Normal cost of goods
sold
11, Job-order cost sheet
12. Materials requisition
13. Adjusted cost of goods sold
14. Work in process
15. Cost of goods sold, finished
goods

_________________________ is the amount that appears as an expense on the income statement after
12
the adjustment for the period’s overhead variance is recorded. Adjusted Cost of Goods Sold
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 14
 Exercises
Fill
 .in the Blanks
1. Process Costing system
2. Applied overhead
3. Overhead variance
4. Pre-determined
overhead rate
5. Plant-wide overhead
rate
6. Underapplied overhead
7. Job-order costing system
8. Time Ticket
9. Raw Materials, work in
process
10. Normal cost of goods
sold
11, Job-order cost sheet
12. Materials requisition
13. Adjusted cost of goods sold
14. Work in process
15. Cost of goods sold, finished
goods

13
When materials are requested for production the cost is removed from ____________ and added to
____________. Raw Materials, Work in Process

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 15

 Exercises
Fill
 .in the Blanks
1. Process Costing system
2. Applied overhead
3. Overhead variance
4. Pre-determined
overhead rate
5. Plant-wide overhead
rate
6. Underapplied overhead
7. Job-order costing system
8. Time Ticket
9. Raw Materials, work in
process
10. Normal cost of goods
sold
11, Job-order cost sheet
12. Materials requisition
13. Adjusted cost of goods sold
14. Work in process
15. Cost of goods sold, finished
goods

14
Applied overhead costs are charged to ________________.
Work in Process

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 16

 Exercises
Fill
 .in the Blanks
1. Process Costing system 6. Underapplied overhead 11, Job-order cost sheet
2. Applied overhead 7. Job-order costing system 12. Materials requisition
3. Overhead variance 8. Time Ticket 13. Adjusted cost of goods sold
4. Pre-determined 9. Raw Materials, work in 14. Work in process
overhead rate process
5. Plant-wide overhead 10. Normal cost of goods 15. Cost of goods sold, finished
rate sold goods

15 When units are sold, their total cost is debited to _______________ and credited to ____________.
Cost of goods sold, Finished Goods
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 17
 Matching. Match each item with the correct statement below : Letters only
a. Predetermined overhead rate e. overapplied overhead
b. Plantwide overhead rate f. underapplied overhead
c. Departmental overhead rate g. applied overhead
d. Overhead variance h. normal cost of goods sold

1. Overhead assigned to production using predetermined rates

2. An overhead rate computed using estimated data
3. The amount by which actual overhead exceeds applied
overhead
4. The difference between actual overhead and applied
overhead
5. The amount by which applied overhead exceeds actual
overhead
6. A single overhead rate calculated using all estimated
overhead for a factory divided by the estimated activity
level across the entire factory
7. Estimated overhead for a single department divided by the
estimated activity level for that same department
1 g 5 e
2 a 6 b
3 f 7 c
4 d
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 18
 Problem 1.
Morrow Company applies overhead based on direct labor hours. At
the beginning of the year, Morrow estimates overhead to be
$620,000, machine hours to be 180,000, and direct labor hours to be
40,000. During February, Morrow has 4,200 direct labor hours and
8,000 machine hours.
Estimated Manufacturing Overhead
Estimated direct labor hours
1. What is the predetermined overhead rate? $ 620,000.00
40,000.00
$ 15.50
2. What is the amount of overhead applied
February? Actual direct labor hours x
Predetermined Overhead rate
4,200 x
3. If the actual overhead for February is $ 15.50
$64,700, what is the overhead variance $ 65,100.00
and is it overapplied or underapplied?
Actual Overhead $ 64,700.00
Applied Overhead 65,100.00
Overapplied overhead $ -400.00

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 19

 2. Atthe beginning of the year, Kyla Inc. estimated that overhead
would be $880,000 and direct labor hours would be 220,000. At
the end of the year, actual overhead was $920,600 and there were
actually 230,000 direct labor hours.
Estimated Overhead $ 880,000.00
What is the predetermined overhead rate?
Estimated Direct Labor hours 220,000.00
Predetermined OH rate $ 4.00
What is the overhead variance?

Actual Overhead $ 920,600

Applied Overhead :
Actual direct labor hours 230,000
Predetermined OH rate $ 4.00 $ 920,000
Underapplied overhead variance $ 600

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 20

 Problem 3.
Mitchell's Softball Gloves Company estimated the following at the beginning of the
year:

Assembly Testing
Department Department Total
Overhead $570,000 $130,000 $700,000
Direct Labor
Hours 142,500 hrs. 32,500 hrs. 175,000 hrs.
Machine Hours
32,000 hrs. 65,000 hrs. 97,000 hrs.

Mitchell uses departmental overhead rates. In the assembly department, direct labor
hours are used to apply overhead. Machine hours are used to apply overhead in the
testing department.

Actual data for August is as follows:

Assembly Testing
Department Department Total
Overhead $42,000 $12,000 $54,000
Direct Labor
Hours 13,500 hrs. 2,430 hrs. 15,930 hrs.
Machine Hours 4,020 hrs. 11,000 hrs. 15,020 hrs.

3.1. If Mitchell uses a plantwide overhead

rate based on direct labor hours, instead of
Total Estimated Overhead $ 700,000.00
departmental rates, what is the
predetermined overhead rate rounded to Total Estimated Labor hours 175,000.00
the nearest cent? Plantwide predetermined OH Rate $ 4.00
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 21
 Problem 3.
Mitchell's Softball Gloves Company estimated the following at the beginning of the
year:

Assembly Testing
Department Department Total
Overhead $570,000 $130,000 $700,000
Direct Labor
Hours 142,500 hrs. 32,500 hrs. 175,000 hrs.
Machine Hours
32,000 hrs. 65,000 hrs. 97,000 hrs.

Mitchell uses departmental overhead rates. In the assembly department, direct labor
hours are used to apply overhead. Machine hours are used to apply overhead in the
testing department.

Actual data for August is as follows:

Assembly Testing
Department Department Total
Overhead $42,000 $12,000 $54,000
Direct Labor
Hours 13,500 hrs. 2,430 hrs. 15,930 hrs.
Machine Hours 4,020 hrs. 11,000 hrs. 15,020 hrs.
Assembly (direct labor hours)
Estimated Overhead $ 570,000.00
3.2. Mitchell decides to continue using Estimated Direct labor hours 142,500.00
Predetermined OH Rate $ 4.00
departmental overhead rates. What are the Testing Department (Macine hours)
predetermined rates for the Assembly and Estimated Overhead $ 130,000.00
Testing departments respectively? Estimated machine hours 65,000.00
Predetermined OH Rate $ 2.00

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 22

 Problem 3.
Mitchell's Softball Gloves Company estimated the following at the beginning of the
year:

Assembly Testing
Department Department Total
Overhead $570,000 $130,000 $700,000
Direct Labor
Hours 142,500 hrs. 32,500 hrs. 175,000 hrs.
Machine Hours
32,000 hrs. 65,000 hrs. 97,000 hrs.

Mitchell uses departmental overhead rates. In the assembly department, direct labor
hours are used to apply overhead. Machine hours are used to apply overhead in the
testing department.

Actual data for August is as follows:

Assembly Testing
Department Department Total
Overhead $42,000 $12,000 $54,000
Direct Labor
Hours 13,500 hrs. 2,430 hrs. 15,930 hrs.
Machine Hours 4,020 hrs. 11,000 hrs. 15,020 hrs.

Assembly (Direct labor hours)

Actual direct labor hours 13,500.00
Predetermined OH rate $ 4.00
3.3 Using departmental overhead rates, Applied Overhead $ 54,000.00
how Much are the applied overhead for Testint (Machine hours)
Assembly and Testing Department Actual Machine hours 11,000.00
Predetermined OH rate $ 2.00
Applied Overhead $ 22,000.00
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 23
 Problem 3.
Mitchell's Softball Gloves Company estimated the following at the beginning of the
year:

Assembly Testing
Department Department Total
Overhead $570,000 $130,000 $700,000
Direct Labor
Hours 142,500 hrs. 32,500 hrs. 175,000 hrs.
Machine Hours
32,000 hrs. 65,000 hrs. 97,000 hrs.

Mitchell uses departmental overhead rates. In the assembly department, direct labor
hours are used to apply overhead. Machine hours are used to apply overhead in the
testing department.

Actual data for August is as follows:

Assembly Testing
Department Department Total
Overhead $42,000 $12,000 $54,000
Direct Labor
Hours 13,500 hrs. 2,430 hrs. 15,930 hrs.
Machine Hours 4,020 hrs. 11,000 hrs. 15,020 hrs.
Assembly
3.4 Mitchell decides to continue using Actual Hours 4
departmental overhead rates. If a job Predetermined OH Rate $ 4.00 $ 16.00
spends 4 hours in assembly and 3 hours in Testing
testing, what is the amount of overhead Actual hours 3
charged to the job? Predetermined OH Rate $ 2.00 6
Total $ 22.00
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 24
 4. Sanders Manufacturing has the following amounts listed before reconciling
the overhead variance.

Estimated overhead $760,000

Applied overhead 800,000
Actual overhead 740,000
Cost of goods sold 1,035,000

Assuming that any overhead variance is immaterial, calculate the adjusted Cost
of Goods Sold after adjusting for the overhead variance.

Applied Overhead $ 800,000

Actual Overhead 740,000
Overapplied Overhead $ 60,000

Cost of goods sold $ 1,035,000

Overapplied Overhead - 60,000
Adjusted Cost of goods sold $ 975,000

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 25

 5. Company uses a predetermined overhead rate based on direct
labor-hours to apply manufacturing overhead to jobs. At the beginning
of the year, the company estimated manufacturing overhead would be
$150,000 and direct labor-hours would be 10,000. The actual figures
for the year were $186,000 for manufacturing overhead and 12,000
direct labor-hours. The cost records for the year will show:
A. overapplied overhead of $30,000
B. underapplied overhead of $30,000
C. underapplied overhead of $6,000
D. overapplied overhead of $6,000

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 26

 .6. Harrell Company uses a predetermined overhead rate based on direct
labor-hours to apply manufacturing overhead to jobs. At the beginning of
the year the company estimated its total manufacturing overhead cost at
$400,000 and its direct labor-hours at 100,000 hours. The actual overhead
cost incurred during the year was $350,000 and the actual direct labor-
hours incurred on jobs during the year was 90,000 hours. The over/under
applied manufacturing overhead for the year would be:
A. $10,000 underapplied
B. $10,000 overapplied
C. $50,000 underapplied
D. $50,000 overapplied

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 27

 8. Brabo Corporation uses direct labor-hours in its predetermined overhead
rate. At the beginning of the year, the estimated direct labor-hours were
15,700 hours. At the end of the year, actual direct labor-hours for the year
were 16,700 hours, the actual manufacturing overhead for the year was
$352,960, and manufacturing overhead for the year was overapplied by
$27,800. The estimated manufacturing overhead at the beginning of the year
used in the predetermined overhead rate must have been:
A. $327,124
B. $357,960
C. $380,760
D. $347,960

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 28

10. The Watts Company uses predetermined overhead rates to apply
manufacturing overhead to jobs. The predetermined overhead
rate is based on labor cost in Dept. A and on machine-hours in
Dept. B. At the beginning of the year, the company made the
following estimates:

What predetermined overhead rates would be used in Dept A and

Dept B, respectively?
A. 50% and $8.00
B. 50% and $5.00
C. $15 and 110%
D. 200% and $5.00

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 29

 12
Simplex Company has the following estimated costs for next year:

Simplex estimates that 10,000 direct labor and 16,000 machine-hours will be worked during
the year. If overhead is applied on the basis of machine-hours, the overhead rate per hour will
be:

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 30

 13.
The following data have been provided by a company:

Compute the amount of direct materials used during November if $20,000 in raw materials
were purchased during the month.

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 31

 14. On December 1, Catherman Corporation had $21,000 of raw materials
on hand. During the month, the company purchased an additional $61,000 of
raw materials. During December, $70,000 of raw materials were requisitioned
from the storeroom for use in production. The debits to the Raw Materials
account for the month of December total:
A. $82,000
B. $70,000
C. $61,000
D. $21,000

15. At the beginning of October, Cozier Corporation had $34,000 of raw

materials on hand. During the month, the company purchased an additional
$78,000 of raw materials. During October, $92,000 of raw materials were
requisitioned from the storeroom for use in production. The credits to the Raw
Materials account for the month of October total:
A. $92,000
B. $34,000
C. $78,000
D. $112,000

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 32

 14. On December 1, Catherman Corporation had $21,000 of raw materials
on hand. During the month, the company purchased an additional $61,000 of
raw materials. During December, $70,000 of raw materials were requisitioned
from the storeroom for use in production. The debits to the Raw Materials
account for the month of December total:
A. $82,000
B. $70,000
C. $61,000
D. $21,000

15. At the beginning of October, Cozier Corporation had $34,000 of raw

materials on hand. During the month, the company purchased an additional
$78,000 of raw materials. During October, $92,000 of raw materials were
requisitioned from the storeroom for use in production. The credits to the Raw
Materials account for the month of October total:
A. $92,000
B. $34,000
C. $78,000
D. $112,000

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 33

 16. During August at Schlappi Corporation, $80,000 of raw materials were
requisitioned from the storeroom for use in production. These raw materials
included both direct and indirect materials. The indirect materials totaled $2,000.
The journal entry to record this requisition would include a debit to
Manufacturing Overhead of:
A. $2,000
B. $80,000
C. $78,000
D. $0

17. During May at Landreth Corporation, $81,000 of raw materials were

requisitioned from the storeroom for use in production. These raw materials
included both direct and indirect materials. The indirect materials totaled $7,000.
The journal entry to record the requisition from the storeroom would include a:
A. debit to Raw Materials of $81,000
B. debit to Work in Process of $81,000
C. credit to Manufacturing Overhead of $7,000
D. debit to Work in Process of $74,000

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 34

 16. During August at Schlappi Corporation, $80,000 of raw materials were
requisitioned from the storeroom for use in production. These raw materials
included both direct and indirect materials. The indirect materials totaled $2,000.
The journal entry to record this requisition would include a debit to
Manufacturing Overhead of:
A. $2,000
B. $80,000
C. $78,000
D. $0

17. During May at Landreth Corporation, $81,000 of raw materials were

requisitioned from the storeroom for use in production. These raw materials
included both direct and indirect materials. The indirect materials totaled $7,000.
The journal entry to record the requisition from the storeroom would include a:
A. debit to Raw Materials of $81,000
B. debit to Work in Process of $81,000
C. credit to Manufacturing Overhead of $7,000
D. debit to Work in Process of $74,000

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 35

 18. In December, Perone Inc. incurred $78,000 of direct labor
costs and $4,000 of indirect labor costs. The journal entry to
record the accrual of these wages would include a:
A. debit to Work in Process of $82,000
B. debit to Manufacturing Overhead of $4,000
C. credit to Work in Process of $82,000
D. credit to Manufacturing Overhead of $4,000

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 36

 19. Inks Corporation incurred $69,000 of actual Manufacturing
Overhead costs during June. During the same period, the
Manufacturing Overhead applied to Work in Process was $70,000.
The journal entry to record the incurrence of the actual Manufacturing
Overhead costs would include a:
A. debit to Manufacturing Overhead of $69,000
B. debit to Work in Process of $70,000
C. credit to Manufacturing Overhead of $69,000
D. credit to Work in Process of $70,000

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 37

 20. Corporation incurred $64,000 of actual Manufacturing
Overhead costs during November. During the same period, the
Manufacturing Overhead applied to Work in Process was
$61,000. The journal entry to record the application of
Manufacturing Overhead to Work in Process would include a:
A. debit to Work in Process of $64,000
B. credit to Manufacturing Overhead of $61,000
C. credit to Work in Process of $64,000
D. debit to Manufacturing Overhead of $61,000

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 38

 21. Eccles Corporation uses a job-order costing system and applies
overhead to jobs using a predetermined overhead rate. During the year
the company's Finished Goods inventory account was debited for
$384,000 and credited for $325,900. The ending balance in the Finished
Goods inventory account was $72,100. At the end of the year,
manufacturing overhead was underapplied by $5,400.

The balance in the Finished Goods inventory account at the beginning of

the year was:
A. $72,100
B. $5,400
C. $14,000
D. $58,100

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 39

 22. Jarratt Inc., a manufacturing company, has provided the
following data for the month of September. The balance in the
Work in Process inventory account was $21,000 at the
beginning of the month and $24,000 at the end of the month.
During the month, the company incurred direct materials cost of
$69,000 and direct labor cost of $31,000. The actual
manufacturing overhead cost incurred was $54,000. The
manufacturing overhead cost applied to Work in Process was
$58,000. The cost of goods manufactured for September was:
A. $158,000
B. $154,000 Beginning Work in Process $ 21,000.00
C. $151,000 Manufacturing cost:
D. $155,000 Direct materials $ 69,000.00
Direct labor 31,000.00
Manufacuring overhead applied 58,000.00 158,000.00
Total work in process $ 179,000.00
Less: Work in process, end 24,000.00
Cost of goods manufactured $ 155,000.00
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 40
 23. . Erholm Inc. has provided the following data for the month
of March. The balance in the Finished Goods inventory
account at the beginning of the month was $43,000 and at
the end of the month was $42,000. The cost of goods
manufactured for the month was $221,000. The actual
manufacturing overhead cost incurred was $45,000 and the
manufacturing overhead cost applied to Work in Process was
$49,000. The adjusted cost of goods sold that would appear
on the income statement for March is:
A. $218,000
B. $220,000 Finished Goods, beginning $ 43,000
C. $222,000 Cost of goods manufactured 221,000
D. $221,000 Total goods available for sale $ 264,000
Less Finished goods, ending 42,000
Unadjusted Cost of goods sold $ 222,000
Overapplied Manufacturing overhead - 4,000
Adjsuted Cost of goods sold $ 218,000
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 41
 25. Cahin Corporation applies manufacturing overhead on
the basis of machine-hours. At the beginning of the most
recent year, the company based its predetermined overhead
rate on total estimated overhead of $21,060. Actual
manufacturing overhead for the year amounted to $13,000
and actual machine-hours were 1,380. The company's
predetermined overhead rate for the year was $16.20 per
machine-hour.

The predetermined overhead rate was based on how many

estimated machine-hours?
A. 1,380
B. 802
C. 225
D. 1,300
Estimated Overhead $ 21,060
divide by Pre-determined OH Rate 16.2
Estimated Machine Hours $ 1,300
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 42
 26. Cahin Corporation applies manufacturing overhead on the
basis of machine-hours. At the beginning of the most recent
year, the company based its predetermined overhead rate on
total estimated overhead of $21,060. Actual manufacturing
overhead for the year amounted to $13,000 and actual
machine-hours were 1,380. The company's predetermined
overhead rate for the year was $16.20 per machine-hour.

The applied manufacturing overhead for the year was closest to:
A. $23,732
B. $21,060
C. $22,356
D. $13,800
Predetermined OH Rate $ 16.20
Actual machine hours 1,380
Applied Manufacturing OH $ 22,356.00
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 43
 Journalize transactions 1-7, 8, 9
Schedules, reports
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 44
 JOURNAL ENTRIES
1 Raw Materials 18,000
Accounts Payable 18,000
Purchase of raw materials on credit

2 Work in Process 12,000

Manufacturing Overhead 8,000
Raw Materials 20,000

3 Manufacturing Overhead 12,000

Accumulated Depreciation 12,000

4 Work in Process 15,000

Sales Salaries Expense 10,000
Manufacturing Overhead 5,000
Salaries Payable 30,000

5 Manufacturing Overhead 4,000

Accounts Payable 4,000

6 Work in Process 28,000

Manufacturing Overhead 28,000

7 Finished Goods 50,000

Work in Process 50,000

8 Cost of Goods Sold 55,000

Finished Goods Inventory 55,000
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 45
 Beginning $ 17,000
Cost of Goods Manufactured 50,000
Total 67,000
Ending 12,000
Unadjusted Cost of goods sold $ 55,000
Under applied Mnufacturing Overhead 1,000
Adjusted Cost of Goods Sold $ 56,000

Actual Overhead $ 29,000

Applied Overhead 28,000
Under Applied $ 1,000

9 Cost of Goods Sold 1,000

Manufacturing Overhead 1,000

Work in Process, beginning $ 8,000

Manufacturing Cost
Direct materials $ 12,000
Direct Labor 15,000
Manufacturing Overhead applied 28,000 55,000
$ 63,000
Less: Cost of Goods Manufactured 50,000
Work in Process, end $ 13,000

Raw Materials:
Beginning Balance $ 4,000
Purchases 18,000
Total $ 22,000
Requisitions 20,000
Baalnce, ending $ 2,000

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 46

 End

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 47