Job Order Costing Sample Problems jeniljhonperez

1. The Pittman Company manufactures special purpose machines to order. On

January 1, there were two jobs in process, #705 and #706. The following
costs were applied to these jobs in the prior year:

Job Number
705 706
Direct Material $ 5 000 $ 8 000
Direct Labor 4 000 3 000
Overhead 4 400 3 300
Total $ 13 400 $ 14 300

During January, the following transactions took place:

 Raw Material costing $40 000 was purchased on account.

 Jobs #707, #708, and #709 were started and following costs were
applied to them:

JOB
707 708 709
Direct Materials $ 3 000 $ 10 000 $ 7 000
Direct Labor 5 000 6 000 4 000

 Job #705 and #706 were completed after incurring additional direct
labor costs of $2 000 and $4 000 respectively
 Wages paid to production employees during January totaled $25 000
 Depreciation for the month of January totaled $10 000
 Utilities bills in the amount of $10 000 were paid for operations during
December
 Utilities bills totaling $12 000 were received for January operations.
 Supplies costing $2 000 were used
 Miscellaneous overhead expenses totaled $24 000 for January.

Actual overhead is applied to individual jobs at the end of each month using
a rate based on actual direct labor costs.

Required:

A. Determine the January Overhead Rate

B. Determine the cost of each job
C. Prepare a statement of cost of goods manufactured.
Job Order Costing Sample Problems jeniljhonperez

Solutions:

A. Determine the January Overhead Rate

Actual Factory Overhead  

Depreciation 10 000
Utilities Bill 12 000
Supplies 2 000
Miscellaneous 24 000
Indirect Labor 4 000
TOTAL 52 000
Total Payroll 25 000
Direct Labor 21 000
Indirect
Labor 4 000

      JOBS         FOH Rate  

  705 706 707 708 709 TOTAL Actual Overhead 52 000  
WIP, Actual Labor Cost 21 000 2.476190476
beg            
DM            
5
DL 2000 4000 000 6 000 4 000 21 000
FOH            

B. Determine the cost of each job

JOBS
  705 706 707 708 709 TOTAL
WIP, beg 13 400 14 300 0 0 0 27 700
DM 0 0 3 000 10 000 7 000 20 000
DL 2 000 4 000 5 000 6 000 4 000 21 000
12
52 080
FOH 4 960 9 920 400 14 880 9 920
TOTAL 20
120 780
COST 20 360 28 220 400 30 880 20 920
Job Order Costing Sample Problems jeniljhonperez

C. Prepare a statement of cost of goods manufactured.

Step 2:

Raw Materials Used 20 000

Direct Labor 23 000
Factory Overhead 52 080
Manufacturing Cost Added 93 080

Step 3:

Manufacturing Cost Added  93 080

Work-in-Process, Beginning  27 700
Manufacturing Cost to Account for  120 780
Work-in-Process, Ending  72 200
Cost of Goods Manufactured  48 580
Job Order Costing Sample Problems jeniljhonperez

2. The Western Corporations, began operations on October 1. It employs a job

order costing system. Overhead is charged at a normal rate of $2.50 per
direct labor hour. The actual operations for the month of October are
summarized as follows:

a. Purchases of Raw Materials, 25 000 pieces @ 1.20 / piece.

b. Material and labor costs charged to production:

Job Units Material Direct Labor cost Direct labor hours

Number
101 10 000 $4 000 $6 000 3 000
102 8 800 3 600 5 400 2 700
103 16 000 7 000 9 000 4 500
104 8 000 3 200 4 800 2 400
105 20 000 8 000 3 600 1 800

c. Actual overhead costs incurred:

Variable $ 18 500
Fixed 15 000

d. Completed jobs: 101, 102, 103, and 104

e. Sales - $ 105 000. All units produced on Jobs 101, 102, and 103 were sold.

Required:
A. Material Inventory
B. Work in Process inventory
C. Finished goods inventory
D. Cost of goods sold
E. Under- or over-applied overhead
Job Order Costing Sample Problems jeniljhonperez

Solutions

A. Material Inventory
Raw Materials, Beginning 0
Raw Materials, Purchases 30 000 25 000 * 1.25
Raw Materials Available for use 30 000
Raw Materials, Ending 4 200 Work back (Purchases - RM used)
Raw Materials Used 25 800 Summation of DM

B. Work in Process inventory

Raw Materials Used 25 800 Summation of DM
Direct Labor 28 800 Summation of DL
Factory Overhead 36 000 DL hrs* 2.50 (rate)
Manufacturing Cost Added 90 600
Work-in-Process, Beginning 0
Manufacturing Cost to Account for 90 6000
Work-in-Process, Ending 16 100 Job 105
Cost of Goods Manufactured 74 500 Job 101 to 104

C. Finished goods inventory

D. Cost of Goods Sold
Cost of Goods Manufactured 74 500 Job 101 to 104
Finished Goods, Beginning 0
Cost of Goods Available for Sale 74 500
Finished Goods, Ending 14 000 Job 104
Cost of Goods Sold 60 500 Job 101 to 103

E. Under- or over-applied overhead

Applied 36 000
Actual (33 500) 18 500 + 15 000
OverApplied 2 500
Job Order Costing Sample Problems jeniljhonperez

Reference for Problem 2:

JOBS
  101 102 103 104 105 TOTAL
WIP, beg            
DM 4000 3600 7000 3200 8000 25 800
DL 6000 5400 9000 4800 3600 28 800
FOH 7500 6750 11250 6000 4500 36000
TOTAL COST 17500 15750 27250 14000 16100 90600

Cost of Goods Sold 60 500

OVERAPPLIED OVERHEAD (2 500)
COGS After Adjustment 58 000