Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 40

Job Costing

The following information applies to the Colbert Company for March production. There are only two jobs (A and B) in production in March.

a. Purchased direct materials and indirect materials with the following summary of receiving reports:

Material A	$16,000
Material B	12,000
Indirect materials	3,000
Total	$31,000

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b. Issued direct materials and indirect materials with this summary of requisitions:

	Job X	Job Y	Total
Material A	$6,000	$15,000	$21,000
Material B	2,000	7,000	9,000
Subtotal	$8,000	$22,000	$30,000
Indirect materials			42,000
Total			$72,000

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c. Factory labor incurred is summarized by these time tickets:

Job X	$16,000
Job Y	12,000
Indirect labor	28,000
Total	$56,000

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d. Factory utilities, factory depreciation, and factory insurance incurred is summarized by these factory vouchers, invoices, and cost memos:

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e. Factory overhead costs were applied to jobs at the predetermined rate of $46 per machine-hour. Job X incurred 1,300 machine-hours; Job Y used 900 machine-hours.

Utilities	$ 3,000
Depreciation	18,000
Insurance	2,500
Total	$23,500

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f. Job X was completed; Job Y was still in process at the end of March.

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g. Job X was shipped to customers during March. Job X had a gross margin of 20 percent based on manu­facturing cost.

The company closed the overapplied or underapplied overhead to the Cost of Goods Sold account at the end of March.

Required

1. Calculate the amount of overapplied or underapplied overhead and state whether the cost of goods sold account will be increased or decreased by the adjustment.

2. Calculate the total manufacturing cost for Job X and Job Y for March.

Step 1 of 3

Overapplied overhead is the case when the applied factory overhead cost is greater than the actual factory overhead cost. Underapplied overhead is the case when the applied factory overhead cost is lesser than the actual factory overhead cost.