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Job Order Costing - In-Class Example W Answer Sheet
Job Order Costing - In-Class Example W Answer Sheet
Toymart Toy Company manufactures tricycles. The company has automated production and
allocated Overhead based on machine hours. ABC Toys expect to incur $200,000 of
manufacturing overhead costs and to use 8,000 machine hours during 2012. ABC toys had no
beginning inventory. It recorded the following transactions during January.
Requirements:
1] Calculate the Pre-determined Manufacturing Overhead Rate.
2] Record the Journal Entries for the purchase of materials & overhead (items #1, #2 & #3)
3] Record the Journal Entries for use of direct materials and labor (items #4 & #5)
5] Record the journal entry to close the allocated balance of the overhead account
STEP 1
Calculate the Pre-determined Manufacturing
Overhead Rate
Rate =
Budgeted OH Cost / Budgeted Activity
($200,000 / 8,000)
= $25 per Machine Hours
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STEP 2
Record the JE for Acquisition of Material, Labor
& Overhead
Direct Material ($65,000)
In-direct material ($10,000)
Other Overhead ($6,000)
Direct Labor ($50,000)
STEP 3
Record the Journal entry for DM & DL to WIP
DM ($65,000)
DL ($50,000)
Move to WIP ($115,000)
STEP 4
Allocate OH to WIP Based on Allocation Base x
Rate
Hours = 600
x Rate = $25
Amt. Alloc = $15,000
STEP 5
Record JE for Over/Under OH
Actual OH ($10,000)
Allocated OH ($15,000)
Over-allocation = $5,000
Journal Entries:
1] Pre-determined Manufacturing Overhead Rate Calculation.
2] Journal Entries for the purchase of materials & overhead (items #1, #2 & #3)
3] Journal Entries for use of direct materials and labor (items #4 & #5)
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Work in Process $60,000
Materials Inventory $60,000
Calculation:
600 x $25 = $15,000
Calculation:
Actual OH = $10,000 (#3 + #6 - 6,000 + 4,000)
Allocated OH = $15,000
Over-allocated OH = $5,000
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