Chapter 3: job-order costing

8-3
The company’s predetermined overheard rate for year: $134,000/20,000 hours = $6.7/h
8-4
POHR=$14/direct labor-hour
Direct labor wage rate= $12 per hour
Dirext materials=$230
Direct labor=$108
1. The total manufacturing cost assigned to Job A-500= direct materials+direct
labor+M.O = $230+$108+$14*108/12 = $464
2. The average cost assigned to each unit included in the job:
$464/40 units = $11.6/unit
8-5
a. Raw materials 80,000
Account Payable 80,000
b. Work in process 62,000
Manufacturing overhead 9,000
Raw materials 71,000
c. Work in process 101,000
Manufacturing overhead 9,000
Salaries and wages payable 112,000
d. Manufacturing overhead 175,000
Account payable 175,000
8-6
POHR=$23.4/direct labor-hour
Estimated direct labor-hours=11,000
Estimated total manufacturing overhead=$257,400
Actual manufacturing overhead cost=$249,000
Total direct labor-hours=10,800 hours
Applied manufacturing overhead=?
Applied manufacturing overhead=$23.4/direct labor-hour * 10,800 hours = $252,720
8-7
1. A schedule of cost of goods manufactured for the month
Raw materials= Beginning raw materials + purchases of raw materials - ending raw
materials-indirect materials = $12,000+$30,000-$18,000-$5,000 =$19,000
 Manufacturing costs= direct materials+direct labor+ M.O applied = $19,000+
$58,000+$87,000 = $164,000
Cost of goods manufactured =Brginning WIP+M.O costs-ending WIP = $56,000+
$164,000-$65,000= $155,000
2. Cost of goods sold = Beginning finished goods+cost of goods manufactured – ending
finish goods+underapplied overhead = $35,000+$155,000-$42,000+$4,000 =
$152,000
8-8
8-9
POHR=$18.20/direct labor-hour
Estimated direct labor-hour=12,000
Estimated total manufacturing overhead=$218,400
Actual M.O costs=$215,000
Total direct labor-hour=11,500
1. Applied M.O cost = $18.20*11,500 =$209,300
Actual > applied => underapplied M.O = $5,700
2. Under applied M.O $5,700 => COGS increase $5,700 => gross margin decrease
$5,700
8-12
1. Identify
(a) Actual M.O
(b) Applied M.O
(c) Cost of goods manufactured
(d) Cost of goods sold
2. Assume that the company closes any balance in the Manufacturing Overhead account
directly to Cost of Goods Sold. Prepare the necessary journal entry
Dr COGS 70,000
Cr M.O 70,000
3. Underapplied OH closed to WIP = (OH applied to WIP/ total applied OH)
*underappllied OH= (19,500/390,000) *70,000 = $3,5000
Underapplied OH closed to Finish goods = (OH applied to Finnish goods/total
applied OH) *underapplied OH = (58,500/390,000) *70,000= $10,050
Underapplied OH closed to COGS = (OH applied to COGS/ total applied OH)
*underapplied OH = (312,000/390,000) *70,000 = $56,000
8-13
1. POHR = 192,000/80,000 = $2.4/MH
2. Applied manufacturing overhead = 2.4*75,000 = $180,000
3. Actual = $184,000 > applied => underapplied M.O = $4,000
 Dr COGS 4,000
Cr M.O 4,000
4. We recognized underapplied overhead cost if we did not transfer enough overhead
cost in the work in process. The company normally estimated the manufacturing
overhead cost to be applied to a job cost which enabled them to estimates pricing
before the year-end.
As the manufacturing cost applied is based on estimation, it is likely that the actual
cost and applied overhead cost are not the same. Therefore, if the manufacturing
overhead applied is greater than the actual overhead, we will recognize an
overapplied overhead. Whereas, when the actual overhead is greater than the applied
manufacturing overhead, we will recognize an underapplied overhead cost.
8-14
Direct materials = $10,000
Direct labor = $12,000
1,000 units

The total manufacturing cost = 10,000+12,000+125%*12,000 = $37,000

Unit product cost = 37,000/1,000 = $37
8-17
POHR = 4,800,000/240,000 = 20
1. journal entries
a. raw materials 325,000
Cash in bank 325,000
b. work in process 232,000
M.O 58,000
Raw materials 290,000
c. WIP 60,000
M.O 120,000
Salaries and wages payable 180,000
d. M.O 75,000
Account payable 75,000
e. M.O 62,000
Account payable 62,000
f. WIP 300,000
M.O 300,000 (20*15,000)
2.
3. WIP 592,000
Direct materials, direct labor, applied overhead 592,000
Cost of goods manufactured 592,000
WIP 592,000
4, unit product cost = 607,000/16,000 = $37 per unit
8-20
1. the amount of overhead cost that would have been charged to each project during
April
Project
harries chan James
Applied M.O 10,800=120*90 9,000=100*90 8,100=90*90
2. Harries and Chan
WIP 45,600
Direct materials, direct labor, applied overhead 45,600
Cost of goods manufactured 45,600
WIP 45,600
Cost of goods sold 45,600
Cost of goods manufactured 45,600
3. WIP of James = $16,700
4. Herries, Chan and James
Manufacturing overhead
Actual Applied
30,000 27,900
2,100 underapplied
8-22
1. POHR = (650,000+3*100,000)/100,000 = $9.5/MH
2. Total manufacturing cost = direct materials+direct labor+applied overhead =
450+210+9.5*40 = $1,040
3. 146,000 machine-hours
Actual overhead = $1,135,000

Applied overhead = 9.5*146,000 machine-hours = $1,387,000

Actual < applied => overapplied = $252,000 => COCS decrease $252,000
 NOI increase $252,000.