PRACTICE QUIZ – Job Order Costing

Beauty Company manufactures picture frames of all sizes and shapes and uses a job

order costing system. There is always some spoilage in each production run. The

following costs relate to the current run:

Estimated overhead (exclusive of spoilage) $160,00

Spoilage (estimated) $

25,000

Sales value of spoiled frames $

11,500

Labor hours 100,000

The actual cost of a spoiled picture frame is $7.00. During the year 170 frames are

considered spoiled. Each spoiled frame can be sold for $4. The spoilage is

considered a part of all jobs.

a. Labor hours are used to determine the predetermined overhead rate.

What is the predetermined overhead rate per direct labor hour?

b. Prepare the journal entry needed to record the spoilage.

c. Prepare the journal entry if the spoilage relates only to Job #12 rather

than being a part of all production runs.

ANS:
a. $160,000 + $25,000 - $11,500 =

$173,500

$173,500/100,000 = $1.735 per DLH

b. Disposal Value of Spoiled Work 680

Manufacturing Overhead 510

Work in Process Inventory 1,19

c. Disposal Value of Spoiled Work 680

Work in Process Inventory-Job 680

#12

DIF: Moderate OBJ: 4-8