Ch.2 Book Exercise + Answer

Chapter 2 – Job Order Costing
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Exercise 2-9 Calculating Cost of Jobs Exercise 2-9
Exercise 2-10 Preparing Cost of Goods Manufactured and Income Statement Exercise 2-10
Exercise 2-23 Preparing Journal Entries Exercise 2-23
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Exercise 2.9
Beginning Finished Goods, 1/1/Year 1 $ 25,300

Beginning Raw Materials, 1/1/Year 1 39,100
Beginning Work in Process, 1/1/Year 1 121,300
Direct labor for Year 1 290,210
Ending Finished Goods, 12/31/Year 1 27,200
Ending Raw Materials, 12/31/Year 1 39,500
Ending Work in Process, 12/31/Year 1 119,100
Material Purchases for Year 1 (including 310,250
16,200
$16,200 of indirect material)
Factory rent 99,768
Department on plant equipment 100,000
Required:
1. Compute direct materials used.
2. Compute applied overhead if the company applies overhead at rate of 0.8 (80%) of direct labor cost
3. Compute total manufacturing cost.
4. Compute cost of goods manufactured.
5. Compute cost of goods sold.
1. Direct materials used = Beginning raw materials inventory + Raw Materials Purchased – Indirect
materials - Ending Raw Materials Inventory
= $39,100 + $310,250 - $16,200 - $39,500
=$293,650
2. Manufacturing Overhead Applied = Direct Labor x Overhead Rate

= $290,210 x 80%
= $232,168
3. Total Manufacturing Costs = Direct Materials Used + Direct Labor + Manufacturing Overhead Applied
=$239,650 + $290,210 + $232,168
=$816,028
4. Cost of Goods Manufactured = Total Manufacturing Costs + Beginning Work in Process – Ending Work
in Process Inventory
= $816,028 + $121,300 - $119,100
=$818,228
5. Cost of Goods Sold = Beginning Finished Goods Inventory + Cost of Goods Manufactured – Ending
Finished Goods Inventory – Overapplied Manufacturing Overhead
=$25,300 + $818,228 - $27,200 -$16,200
= $800,128
Overapplied Manufacturing Overhead = Applied Manufacturing Overhead – Actual Overhead

= $232,168 - $215,968
=$16,200
Exercise 2-10
Use the information in the question above
Required:
1. Prepare a Cost of Goods Manufactured Report.
2. Prepare a Partial Income Statement if sales revenue was $1,300,000 and operating expenses were
$235,000 for Year 1.
1. Prepare a Cost of Goods Manufactured Report.
Cost of Goods Manufactured Report
Beginning raw materials inventory $ 39,100

Plus: Raw material purchased 310,250
Less: Indirect materials (16,200)
Less: Ending raw materials inventory (39,500)
Direct materials used in production $293,650
Direct labor 290,210
Manufacturing overhead applied 232,168
Total current manufacturing costs $816,028
Plus: Beginning work in process inventory 121,300
Less: Ending work in process inventory (119,100)
Cost of goods manufactured $818,228
Manufacturing Overhead Applied = Direct Labor × Overhead Rate

= $290,210 x 80%
= $232,168
2. Prepare a Partial Income Statement if sales revenue was $1,300,000 and operating expenses were
$235,000 for Year 1.
Income Statement
Sales revenue $1,300,000
Less: Cost of goods sold
Beginning finished goods inventory 25,300
Plus: Cost of goods manufactured 818,228
Less: Ending finished goods inventory (27,200)
Unadjusted cost of goods sold 816,328
Less: Overapplied manufacturing overhead 16,200 800,128
Gross profit $ 499,872
Less: Selling and administrative expenses 235,000
Net operating income $ 264,872
Overapplied Manufacturing Overhead = Applied Manufacturing Overhead – Actual Overhead

= $232,168 − $215,968
= $16,200
Exercise 2-23
Mars Manufacturing Company incurred the following transactions during the year:
a. Purchased raw materials on account, $60,400.

b. Requisitioned raw materials of $34,000 to the factory, which included $9,200 of indirect materials.
c. Accrued factory labor costs of $83,200, which included $19,000 of indirect labor. The workers have
not yet been paid.
d. Incurred actual manufacturing overhead costs (on account) of $96,000.
e. Recorded depreciation for office equipment of $8,500.
f. Manufacturing overhead was applied at the rate of 140% of direct labor cost.
g. Completed jobs costing $105,000.
h. Sold jobs costing $80,000 for $92,500 on account.
Required:
1. Journalize transactions a–h.
2. Compute the over- or underapplied overhead.
3. Prepare the journal entry to transfer the over- or underapplied balance to Cost of Goods Sold.
4. Compute adjusted cost of goods sold.
1. Journalize transactions a–h.
a. Purchased raw materials on account, $60,400.
Debit Credit
Raw Materials Inventory 60,400
Accounts Payable 60,400
b. Requisitioned raw materials of $34,000 to the factory, which included $9,200 of indirect materials.
Debit Credit
Work in Process Inventory 24,800
Manufacturing Overhead 9,200
Raw Materials Inventory 34,000
c. Accrued factory labor costs of $83,200, which included $19,000 of indirect labor not yet been paid.
Debit Credit
Wages Payable 83,200
d. Incurred actual manufacturing overhead costs (on account) of $96,000.
Debit Credit
Actual Manufacturing Overhead Payable 96,000
c. Accrued factory labor costs of $83,200, which included $19,000 of indirect labor. The workers have
not yet been paid.
Debit Credit
Wages Payable 83,200
e. Recorded depreciation for office equipment of $8,500.
Debit Credit
Depreciation Expense 8,500

Accumulated Depreciation 8,500
f. Manufacturing overhead was applied at the rate of 140% of direct labor cost.
Debit Credit
Manufacturing Overhead 89,880 64,200 × 140%
g. Completed jobs costing $105,000.
Debit Credit
Finished Goods Inventory 105,000
h. Sold jobs costing $80,000 for $92,500 on account.

Debit Credit
Accounts Receivable 92,500

Sales 92,500
Cost of Goods Sold 80,000

Finished Goods Inventory 80,000
2. Compute the over- or underapplied overhead.
Over- or underapplied Manufacturing Overhead = Actual Overhead − Applied Manufacturing Overhead

= $ 124,200 − $ 89,880
Underapplied Manufacturing Overhead = $ 34,320
3. Prepare the journal entry to transfer the over- or underapplied balance to Cost of Goods Sold.
Debit Credit
Cost of Goods Sold 34,320
4. Compute adjusted cost of goods sold.
Adjusted Cost of Goods Sold = Unadjusted Cost of Goods Sold +/ − Under- or Overapplied Overhead
= $ 80,000 + $ 34,320
= $ 144,320

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Chapter 2 – Job Order Costing

Beginning Finished Goods, 1/1/Year 1 $ 25,300

2. Manufacturing Overhead Applied = Direct Labor x Overhead Rate

Overapplied Manufacturing Overhead = Applied Manufacturing Overhead – Actual Overhead

Use the information in the question above

Cost of Goods Manufactured Report

Beginning raw materials inventory $ 39,100

Manufacturing Overhead Applied = Direct Labor × Overhead Rate

Overapplied Manufacturing Overhead = Applied Manufacturing Overhead – Actual Overhead

a. Purchased raw materials on account, $60,400.

e. Recorded depreciation for office equipment of $8,500.

Depreciation Expense 8,500

Manufacturing Overhead 89,880 64,200 × 140%

h. Sold jobs costing $80,000 for $92,500 on account.

Accounts Receivable 92,500

Cost of Goods Sold 80,000

Over- or underapplied Manufacturing Overhead = Actual Overhead − Applied Manufacturing Overhead

Underapplied Manufacturing Overhead = $ 34,320

Cost of Goods Sold 34,320

Manufacturing Overhead 34,320

4. Compute adjusted cost of goods sold.

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