CIA 1004 Cost Accounting

SEM 1 2022/2023
ACTIVITIES FOR WEEK 5
MORE SAMPLE OF QUESTIONS

Answer all questions.

Your participation during the class will be assessed.

QUESTION 1
Athena Corporation uses a job-cost system and applies manufacturing overhead to products on the basis
of machine hours. The company's accountant estimated that overhead and machine hours would total
$800,000 and 50,000, respectively, for 2021. Actual costs incurred follow.

Direct material used $250 000

Direct labor $300 000
Manufacturing overhead $816 000

The manufacturing overhead figure presented above excludes $27,000 of sales commissions incurred by
the firm. An examination of job-cost records revealed that 18 jobs were sold during the year at a total cost
of $2,960,000. These goods were sold to customers for $3,720,000. Actual machine hours worked totaled
51,500 hours, and Athens adjusts under- or overapplied overhead at year-end to Cost of Goods Sold.

Required:
(i) Determine the company's predetermined overhead application rate.
(ii) Determine the amount of under- or overapplied overhead at year-end. Be sure to indicate whether overhead
was under- or overapplied.
(iii) Compute the company's adjusted cost of goods sold.
(iv) What alternative accounting treatment could the company have used at year-end to adjust for under- or
overapplied overhead? Is the alternative that you suggested appropriate in this case? Why?

QUESTION 2
Boxworth and Associates designs relatively small sports stadiums and arenas at various sites throughout the
country. The firm's accountant prepared the following budget for the upcoming year:

Professional staff salaries $ 3 000 000

Administrative support staff $ 800 000
Other operating costs $ 200 000

80% of professional staff salaries are directly traceable to client projects, a figure that falls to 60% for the
administrative support staff and other operating costs. Traceable costs are charged directly to client projects;
nontraceable costs, on the other hand, are treated as firm overhead and charged to projects by using a
predetermined overhead application rate.

Boxworth had one project in process at year-end: an arena that was being designed for Charlotte County.
Costs directly chargeable to this project were:

Professional staff salaries $ 90 000

Administrative support staff $ 17 300
Other operating costs $ 6 700
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 Required:

(i) Determine Boxworth's overhead for the year and the firm's predetermined overhead application
rate. The rate is based on costs directly chargeable to firm projects.
(ii) Compute the cost of the Charlotte County arena project as of year-end.
(iii) Present three examples of "other operating costs" that might be directly traceable to the Charlotte
County project.

QUESTION 3
Buckman Corporation, which began operations on January 1 of the current year, reported the following
information:

Estimated manufacturing overhead $ 600 000

Actual manufacturing overhead $ 639 000
Estimated direct labor cost $ 480 000
Actual direct labor cost $ 500 000
Total debits in WIP account $ 1 880 000
Total credits in FG account $ 920 000

Buckman uses a normal cost system and applies manufacturing overhead to jobs on the basis of direct
labor cost. A 60% markup is added to the cost of completed production when finished goods are sold.
On December 31, job no. 18 was the only job that remained in production. That job had direct-material
and direct-labor charges of $16,500 and $36,000, respectively.

Required:
(i) Determine the company's predetermined overhead rate.
(ii) Determine the amount of under- or overapplied overhead. Be sure to label your answer. C.
Compute the amount of direct materials used in production.
(iii) Calculate the balance the company would report as ending work-in-process inventory.
(iv) Prepare the journal entry (ies) needed to record Buckman's sales, which are all made on account.

QUESTION 4
Dancer Corporation, which uses a job-costing system, had two jobs in process at the start of 2019: job
no. 59 ($95,000) and job no. 60 ($39,500). The following information is available:
(a) The company applies manufacturing overhead on the basis of machine hours. Budgeted
overhead and machine activity for the year were anticipated to be $720,000 and 20,000 hours,
respectively.

(b) The company worked on three jobs during the first quarter. Direct materials used, direct labor
incurred, and machine hours consumed were:

Job No. Direct material Direct labor Machine Hours

59 $18 000 $45 000 900
60 --- $ 25 000 600
61 $ 37 000 $ 35 000 1200

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 (c) Manufacturing overhead during the first quarter included charges for depreciation ($20,000),
indirect labor ($50,000), indirect materials used ($4,000), and other factory costs ($108,700).

(d) Dancer completed job no. 59 and job no. 60. Job no. 59 was sold for cash, producing a gross
profit of $24,600 for the firm.
Required:

(a) Determine the company's predetermined overhead application rate.

(b) Prepare journal entries as of March 31 to record the following. (Note: Use summary entries where
appropriate by combining individual job data.)

i. The issuance of direct material to production, and the direct labor incurred.
ii. The manufacturing overhead incurred during the quarter.
iii. The application of manufacturing overhead to production.
iv. The completion of job no. 59 and no. 60.
v. The sale of job no. 59.

QUESTION 5 [PYQ]
Meranti Jaya makes home office furniture from fine hardwoods.the company uses the job order costing system
and predetermined overhead rates to apply manufacturing overhead cost to jobs. The predetermined overhead
rates in the preparation department is based on the machine hours and the rate in Fabrication Dept is based on
direct labour cost. At the beginning of the year, the company’s management made the following estimates for the
year.

Department
Preparation Fabrication
Machine hours 80000 21000
Direct labor hours 35000 65000
Direct material cost $190 000 $400 000
Direct labor cost $280 000 $530 000
Manufacturing overhead cost $416 000 $720 000

Job 127 was started on 1 April and completed on 12 May.the company’s cost record show the following
information on the job:

Department
Preparation Fabrication
Machine hours 350 70
Direct labor hours 80 130
Direct material cost $940 $1200
Direct labor cost $710 $980

(a) Compute the redetermined overhead rate used during the year in the preparation Dept and in the
Fabrication Dept?
(b) Compute the total overhead cost applied to Job 127.
(c) Compute the total cost recorded for job 127.
(d) If the job contained 25 units and only 20 units are sold at 45% mark up on the unit costs, compute the gross
profit for the company?
(e) At the end of the year, the records of Meranti Jaya revealed the following actual cost and operating data for
all jobs worked on during the year.

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 Department
Preparation Fabrication
Machine hours 73000 24000
Direct labor hours 30000 68000
Direct material cost $165000 $420000
Manufacturing overhead cost $390000 $740000

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