# Accounting Study Set 8

## Quiz 19 :Job Order Cost Systems

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CP Managerial analysis The controller of the plant of Minsky Company prepared a graph of the unit costs from the job cost reports for Product One. The graph appeared as follows: How would you interpret this information What further information would you request
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Solution - As can be seen from the graph, the unit cost of the product has been steadily increasing with sudden peaks on every Friday. Over a course of 3 weeks the unit cost increased from $21 to$39.
In order to further analyze, the increase in per unit cost and the peaks appearing on every Friday, additional data is required.
Further breakup of the constituents of unit costs, namely direct material, direct labor and factory overheads need to be ascertained along with the number of units being sold.

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entries and schedules for unfinished jobs and completed jobs Hildreth Company uses a job order cost system. The following data summarize the operations related to production for April 2014, the first month of operations: a. Materials purchased on account, $147,000. b. Materials requisitioned and factory labor used: c. Factory overhead costs incurred on account,$6,000. d. Depreciation of machinery and equipment, $4,100. e. The factory overhead rate is$40 per machine hour. Machine hours used: f. Jobs completed: 101, 102, 103, and 105. g. Jobs were shipped and customers were billed as follows: Job 101, $62,900; Job 102,$80,700; Job 105, $45,500. Instructions 1. Journalize the entries to record the summarized operations. 2. Post the appropriate entries to T accounts for Work in Process and Finished Goods, using the identifying letters as transaction codes. Insert memo account balances as of the end of the month. 3. Prepare a schedule of unfinished jobs to support the balance in the work in process account. 4. Prepare a schedule of completed jobs on hand to support the balance in the finished goods account. Free Essay Answer: Answer: Solution: For the first month operation, HIL Company recorded the following transactions for the month of April: a. Materials purchased on account,$147,000
b. Materials requisitioned and factory labor used:
c. Factory overhead costs incurred on account, $6,000 d. Depreciation of machinery and equipment,$4,100
e. The factory overhead rate is $40 machine hour. Machine hour used is as per table above. f. Job completed: 101,102,103 and 105 g. Jobs were shipped and customers were billed as follows: Job 101,$62,900; Job 102, $80,700; Job 103,$45,500
1. Journal entries to record the transactions are as follows:
1a. Materials……………………………………………………$147,000 Account payable………………………………………… 147,000 1b. Work in process……………………………………………..$262,490
Materials………………………………………………… 130,110
Wages payable………………………………………….. 132,380
Factory overhead…………………………………………………$29,160 Materials…………………………………………………. 9,000 Wages payable…………………………………………… 20,160 1c. Factory overhead…………………………………………...$6,000
Accounts payable……………………………………….. 6,000
1d. Factory overhead- Depreciation…………………………………. $4,100 Accumulated depreciation…………………………. 4,100 1e. Work in process……………………………………………$40,480
1f. Finished Goods……………………………………………. $175,090 Work in process……………………………………….. 175,090 Material -$73,910
Labor - $77,180 Factory overhead-$24,000
1g. Account receivable…………………………………………$189,100 Sales…………………………………………………….. 189,100 Cost of Goods sold………………………………………………$142,610
Finished goods…………………………………………... 142,610
2. The T-accounts for work in process and finished goods account are as follows :
Balance in work in process account - $127,880 Balance in Finished good account -$32,480
3. Schedule for unfinished jobs:
Work in Process account
4. Schedule of completed jobs on hand in the Finished Goods account
Finished Goods account

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Job order cost sheet Cheng Furniture Company refinishes and reupholsters furniture. Cheng Furniture uses a job order cost system. When a prospective customer asks for a price quote on a job, the estimated cost data are inserted on an unnumbered job cost sheet. If the offer is accepted, a number is assigned to the job, and the costs incurred are recorded in the usual manner on the job cost sheet. After the job is completed, reasons for the variances between the estimated and actual costs are noted on the sheet. The data are then available to management in evaluating the efficiency of operations and in preparing quotes on future jobs. On September 3, 2014, an estimate of $3,050 for reupholstering a sofa and loveseat was given to John Jobs. The estimate was based on the following data: On September 6, the sofa and loveseat were picked up from the residence of John Jobs, 220 Apple Lane, Cupertino, CA, with a commitment to return it on October 31. The job was completed on October 28. The related materials requisitions and time tickets are summarized as follows: Instructions 1. Complete that portion of the job order cost sheet that would be prepared when the estimate is given to the customer. 2. Record the costs incurred, and prepare a job order cost sheet. Comment on the reasons for the variances between actual costs and estimated costs. For this purpose, assume that three meters of materials were spoiled, the factory overhead rate has proven to be satisfactory, and an inexperienced employee performed the work. Free Essay Answer: Answer: Solution: 1. Job order cost sheet that would be prepared when giving estimate to the client would be as follows: 2. The actual cost incurred is reflected in the job order cost sheet as follows: As can be seen from the table above, the actual cost was more than the estimated cost. A comparison of the two job order cost sheet reveals that although the cost per unit of material and labor remains same, the amount of material and labor used for completion of the job was more than the estimated amount. The reason for such variance might be that an inexperienced employee performed the work and 3 meters of material was wasted. Tags Choose question tag What kind of firm would use a job order cost system Essay Answer: Tags Choose question tag Factory overhead rate Salvo Inc., a specialized equipment manufacturer, uses a job order costing system. The overhead is allocated to jobs on the basis of direct labor hours. The overhead rate is now$1,500 per direct labor hour. The design engineer thinks that this is illogical. The design engineer has stated the following: Our accounting system doesn't make any sense to me. It tells me that every labor hour carries an additional burden of $1,500. This means that direct labor makes up only 6% of our total product cost, yet it drives all our costs. In addition, these rates give my design engineers incentives to "design out" direct labor by using machine technology. Yet, over the past years as we have had less and less direct labor, the overhead rate keeps going up and up. I won't be surprised if next year the rate is$2,000 per direct labor hour. I'm also concerned because small errors in our estimates of the direct labor content can have a large impact on our estimated costs. Just a 30-minute error in our estimate of assembly time is worth $750. Small mistakes in our direct labor time estimates really swing our bids around. I think this puts us at a disadvantage when we are going after business. 1. What is the engineer's concern about the overhead rate going "up and up" 2. What did the engineer mean about the large overhead rate being a disadvantage when placing bids and seeking new business 3. What do you think is a possible solution Essay Answer: Tags Choose question tag Job order cost sheet Refco Furniture Company refinishes and reupholsters furniture. Refco Furniture uses a job order cost system. When a prospective customer asks for a price quote on a job, the estimated cost data are inserted on an unnumbered job cost sheet. If the offer is accepted, a number is assigned to the job, and the costs incurred are recorded in the usual manner on the job cost sheet. After the job is completed, reasons for the variances between the estimated and actual costs are noted on the sheet. The data are then available to management in evaluating the efficiency of operations and in preparing quotes on future jobs. On January 21, 2014, an estimate of$1,391 for reupholstering a sofa and a loveseat was given to Steve Scully. The estimate was based on the following data: On January 26, the sofa and loveseat were picked up from the residence of Steve Scully, 160 Soda Alley, Purchase, NY, with a commitment to return them on March 3. The job was completed on March 1. The related materials requisitions and time tickets are summarized as follows: Instructions 1. Complete that portion of the job order cost sheet that would be prepared when the estimate is given to the customer. 2. Record the costs incurred, and prepare a job order cost sheet. Comment on the reasons for the variances between actual costs and estimated costs. For this purpose, assume that two meters of materials were spoiled, the factory overhead rate has proven to be satisfactory, and an inexperienced employee performed the work.
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Factory overhead costs During February, Gross Company incurred factory overhead costs as follows: indirect materials, $34,000; indirect labor,$81,000; utilities cost, $10,000; and factory depreciation,$61,000. Journalize the entry to record the factory overhead incurred during February. During August, Rothchild Company incurred factory overhead costs as follows: indirect materials, $17,500; indirect labor,$22,000; utilities cost, $9,600; and factory depreciation,$17,500. Journalize the entry to record the factory overhead incurred during August.
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Cost of materials issuances under the FIFO method An incomplete subsidiary ledger of wire cable for July is as follows: a. Complete the materials issuances and balances for the wire cable subsidiary ledger under FIFO. b. Determine the balance of wire cable at the end of July. c. Journalize the summary entry to transfer materials to work in process. d. Explain how the materials ledger might be used as an aid in maintaining inventory quantities on hand.
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Name two principal types of cost accounting System. b. Which system provides for a separate record of each particular quantity of product that passes through the factory c. Which system accumulates the costs for each department or process within the factory
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Recording manufacturing costs Todd Lay just began working as a cost accountant for Enteron Industries Inc., which manufactures gift items. Todd is preparing to record summary journal entries for the month. Todd begins by recording the factory wages as follows: Todd's supervisor, Jeff Fastow, walks by and notices the entries. The following conversation takes place: Jeff: That's a very unusual way to record our factory wages and depreciation for the month. Todd: What do you mean This is exactly the way we were taught to record wages and depreciation in school. You know, debit an expense and credit Cash or payables, or in the case of depreciation, credit Accumulated Depreciation. Jeff: Well, it's not the credits I'm concerned about. It's the debits-I don't think you've recorded the debits correctly. I wouldn't mind if you were recording the administrative wages or office equipment depreciation this way, but I've got real questions about recording factory wages and factory machinery depreciation this way. Todd: Now I'm really confused. You mean this is correct for administrative costs, but not for factory costs Well, what am I supposed to do-and why 1. Play the role of Jeff and answer Todd's questions. 2. Why would Jeff accept the journal entries if they were for administrative costs
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Issuance of materials On February 8, Gross Company purchased on account 72,000 units of raw materials at $8 per unit. On February 19, raw materials were requisitioned for production as follows:32,000 units for Job 60 at$7 per unit and 37,000 units for Job 61 at $8 per unit. Journalize the entry on February 8 to record the purchase and on February 19 to record the requisition from the materials storeroom. On August 4, Rothchild Company purchased on account 12,000 units of raw materials at$14 per unit. On August 24, raw materials were requisitioned for production as follows:5,000 units for Job 40 at $8 per unit and 6,200 units for Job 42 at$14 per unit. Journalize the entry on August 4 to record the purchase and on August 24 to record the requisition from the materials storeroom.
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What document is the source for (a) debiting the accounts in the materials ledger and (b) crediting the accounts in the materials ledger
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Entries for costs in a job order cost system Royal Technology Company uses a job order cost system. The following data summarize the operations related to production for March: a. Materials purchased on account, $770,000. b. Materials requisitioned,$680,000, of which $75,800 was for general factory use. c. Factory labor used,$756,000, of which $182,000 was indirect. d. Other costs incurred on account for factory overhead,$245,000; selling expenses, $171,500; and administrative expenses,$110,600. e. Prepaid expenses expired for factory overhead were $24,500; for selling expenses,$28,420; and for administrative expenses, $16,660. f. Depreciation of factory equipment was$49,500; of office equipment, $61,800; and of office building,$14,900. g. Factory overhead costs applied to jobs, $568,500. h. Jobs completed,$1,500,000. i. Cost of goods sold, $1,375,000. Instruction Journalize the entries to record the summarized operations. Essay Answer: Tags Choose question tag Cost flow relationships The following information is available for the first month of operations of Icahn Inc., a manufacturer of art and craft items: Factory overhead was applied during the year. Using the above information, determine the following missing amounts: a. Cost of goods sold b. Direct materials cost c. Direct labor cost Essay Answer: Tags Choose question tag Entries for costs in a job order cost system Churchill Co. uses a job order cost system. The following data summarize the operations related to production for November: a. Materials purchased on account,$528,000. b. Materials requisitioned, $462,000, of which$58,800 was for general factory use. c. Factory labor used, $545,200, of which$76,400 was indirect. d. Other costs incurred on account for factory overhead, $123,400; selling expenses,$195,500; and administrative expenses, $121,800. e. Prepaid expenses expired for factory overhead were$24,360; for selling expenses, $20,600; and for administrative expenses,$14,900. f. Depreciation of office building was $70,500; of office equipment,$36,120; and of factory equipment, $24,360. g. Factory overhead costs applied to jobs,$300,400. h. Jobs completed, $840,000. i. Cost of goods sold,$740,000. Instructions Journalize the entries to record the summarized operations.
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Which account is used in the job order cost system to accumulate direct materials, direct labor, and factory overhead applied to production costs for individual jobs
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Entries and schedules for unfinished jobs and completed jobs Sinatra Industries Inc. uses a job order cost system. The following data summarize the operations related to production for January 2014, the first month of operations: a. Materials purchased on account, $39,300. b. Materials requisitioned and factory labor used: c. Factory overhead costs incurred on account,$7,500. d. Depreciation of machinery and equipment, $2,640. e. The factory overhead rate is$60 per machine hour. Machine hours used: f. Jobs completed: 201, 202, 203 and 205. g. Jobs were shipped and customers were billed as follows: Job 201, $11,000; Job 202,$14,820; Job 203, $19,920. Instructions 1. Journalize the entries to record the summarized operations. 2. Post the appropriate entries to T accounts for Work in Process and Finished Goods, using the identifying letters as transaction codes. Insert memo account balances as of the end of the month. 3. Prepare a schedule of unfinished jobs to support the balance in the work in process account. 4. Prepare a schedule of completed jobs on hand to support the balance in the finished goods account. Essay Answer: Tags Choose question tag Direct labor costs During February, Gross Company accumulated 15,000 hours of direct labor costs on Job 60 and 18,000 hours on Job 61. The total direct labor was incurred at a rate of$24.00 per direct labor hour for Job 60 and $26.50 per direct labor hour for Job 61. Journalize the entry to record the flow of labor costs into production during February. During August, Rothchild Company accumulated 3,500 hours of direct labor costs on Job 40 and 4,200 hours on Job 42. The total direct labor was incurred at a rate of$25.00 per direct labor hour for Job 40 and \$23.50 per direct labor hour for Job 42. Journalize the entry to record the flow of labor costs into production during August.