MBA 649 Tutorials Questions prepared by Mazri Hafiz

TUTORIAL QUESTIONS: JOB ORDER COSTING

The following cases/questions are fictitious. All references are not, in any form,
reflective of the person(s) or entities named in the text. These cases are for the
sole purpose of MBA 649 (Strategic Managerial Accounting & Control) tutorials.
Reproduction and distribution of this document, in any form, is prohibited.
Solutions to these questions are only available by attending tutorials.

QUESTION 1: PREDETERMINED OVERHEAD RATES AND ADJUSTMENTS

Fieja was recently tasked with handling the assignment of overhead costs at
Naresh Academy Inc. Since the company follows a normal job order cost system,
Fieja felt it would be best to assign overhead based on a predetermined rate.
She compiled the following budgeted data:

• Estimated overhead for the year amounted to $2,365,000

• Expected labour cost of $2,956,250
• Expected labour hours amounted to 220,000 hours
• Expected machine hours amounted to 118,250 hours

Fieja then compiled the following actuals for all jobs worked during the year:

Actual Usage DL Dollars DL Hours Machine Hours

Job SZN 1 $ 980,000.00 70,000 30,000
Job SZN 2 $ 588,000.00 42,000 10,000
Job SZN 3 $ 1,120,000.00 80,000 40,000
JOB SZN 4 $ 420,000.00 30,000 15,000

Actual overhead costs for the year consisted of the following:

Manufacturing Overhead Cost

Rent $ 800,000.00
Utilities $ 600,000.00
Depreciation $ 500,000.00
Property Insurance $ 140,000.00
Indirect Materials $ 46,500.00
Indirect Labour $ 300,000.00

Required 1: Apply overhead based on direct labour cost. Calculate the

under or over-applied amount and adjust via cost of goods sold.

Required 2: Apply overhead based on direct labour hours. Calculate the

under or over-applied amount and adjust via cost of goods sold.

Required 3: Apply overhead based on machine hours. Calculate the under

or over-applied amount and adjust via cost of goods sold.
MBA 649 Tutorials Questions prepared by Mazri Hafiz

QUESTION 2: COMPREHENSIVE CHAPTER QUESTION

Laplante Inc. is an artificial hair manufacturer that uses normal job order costing.
Overhead for the year was estimated at $720,000. The company manufactures
the best hair anyone could ever ask for. The managerial accountant, Ryan, was
put in charge of creating year end reports. The company’s fiscal year ends on
December 31st 2012.

Job cost data showed the following:

Direct Materials Direct Labour

Job FWU $ 57,500.00 $ 41,000.00
Job FWV $ 144,000.00 $ 100,000.00
Job FWW $ 150,000.00 $ 180,000.00
Job FWX $ 186,500.00 $ 190,000.00
Job FWY $ 132,000.00 $ 89,000.00
Job FWZ $ 100,000.00 $ 60,000.00

The company applies overhead based on a direct labour dollars estimate of

$600,000. The company also applied $49,200 of overhead to Job FWU. During
the year, the company incurred factory rent, utilities, depreciation, indirect labour
and other factory expenditures at a cost of $300,000, $140,000, $96,000,
$75,000 and $180,000, respectively. Selling and administrative expenses for the
year were $2,500,000. On December 31st, 2012, Job FWT and FWZ were still in
process. All other jobs were completed and sold except for Job FWW.

Raw materials as at December 31st 2011 were $40,000. Materials purchases for
the year were $800,000. Total indirect materials requisition for the year
amounted to $20,000. The company’s income tax rate is 38%.

On December 31st, 2011, Job FWT and FWU were in process at a cost of
$180,000 and $152,000, respectively. Furthermore, the company already had
Job FWA completed and on hand at a cost of $420,000.

Company sales for the year amounted to $5,040,000 while maintaining a gross
margin of 60% prior to any adjustment.

Required 1: Determine the predetermined overhead rate

Required 2: Prepare a cost of goods manufactured schedule

Required 3: Prepare an income statement. Assume any under or over

applied amount to be immaterial.

Required 4: Adjust for over or under applied manufacturing overhead

assuming any under or over applied amount is material.