ACCG 2000 Week 3 Homework Questions (Due in Week 4)

Discussion Questions
1. The production of 100 cartons of cans of soft drinks could be costed as part of a job costing
system or a process costing system. Do you agree? Explain.

Exercises
1. South West Publishing bases its predetermined overhead rate on direct labour hours.
Estimates and actual results for 2018 are shown below:

Estimated overhead $100,000

Actual overhead $110,000
Estimated direct labour hours 10,000
Actual direct labour hours 10,500
Actual direct labour cost 60,000

Required:

a) What is the predetermined overhead rate?

b) How much overhead would have been applied by South West Publishing to Work in
Process during 2018?
c) What is the amount of underapplied or overapplied overhead at the end of 2018 for
South West Publishing?

Problems

1. Quality Crafts Ltd uses a job costing system. The August cost data were as follows:

Raw materials purchased on credit $ 411,840

Direct labour costs 426,240
Raw materials issued to production 383,050
Actual manufacturing overhead costs 319,680
Cost of goods manufactured 1,097,300
Sales (all credit) 1,209,600

Machine hours for August were 64,800 hours, and the business applies overhead to
production at a rate of $5.75 per machine hour. The beginning raw materials inventory was
$46,080. The beginning work in process inventory was $77,760. The beginning and ending
finished goods inventories were $115,200 and $149,750 respectively.

Required:

a) Prepare general journal entries to record the August transactions.

b) Was overhead overapplied or underapplied for the month of August?
c) Calculate the ending balances of raw materials and work in process. (Hint: Prepare T
accounts for inventories.)
2. Horton Company uses a job costing system, and manufacturing overhead is applied on the
basis of machine hours. At the beginning of the year, management estimated that the
company would incur $1,050,000 of manufacturing overhead costs and use 70,000 machine
hours.

Horton Company recorded the following events during the month of March.

(a) Beginning balances:

Raw materials inventory (RM): $100,000
Work in process inventory (WIP): $150,000
Finished goods inventory (FGs): $30,000

(b) Purchased 200,000 kilograms of raw materials on account. The cost was $4.00 per
kilogram.

(c) Issued 150,000 kilograms of materials to production. Assume all materials issued are at
$4 per kilogram.
(d) Incurred $250,000 of direct labour costs and $50,000 of indirect labour costs.
(e) Recorded depreciation on equipment for the month, $18,000.
(f) Recorded $42,000 of insurance costs for the manufacturing property.
(g) Recorded $35,000 for utilities and other miscellaneous items for the manufacturing
plant.
(h) Completed job M11 costing $170,000 and job M12 costing $800,000 during the month
and transferred them to Finished Goods inventory account.

(i) Shipped job M12 to the customer during the month.

(j) Used 10,000 machine hours during March.
Required:
Complete the relevant T- accounts to show the flow of costs through the company’s
manufacturing accounts.
 Raw Materials Inventory Work in Process Inventory

Finished Goods Inventory Cost of Goods Sold

Manufacturing Overhead