Solutions Are Presented at the End of the Practice Set. Please Be Vigilant in Remembering

PRACTICE SET

Solutions are presented at the end of the practice set. Please be vigilant in remembering the terms used for each required item and how each item was computed. ENJOY!!!!!!!!!!!!!

PROBLEM 1: On October 1, the general ledger of Slipshod Company had the following accounts and balances:

The subsidiary ledgers had the following information on October 1:

During October, the following costs were incurred on account:

A summary of the materials requisition slips and the labor time tickets for the month revealed the following distribution:

Overhead is applied based upon direct labor cost. Jobs B81, B83, and B84 were for 8,000, 6,000 and 4,800 units of product respectively, and were completed during October. Jobs B80, B81, B82, and B83 were sold on account for $150,000.

Required: Prepare T-accounts for a job order cost system, posting the beginning balances and all transactions for the month. Clearly indicate the ending balances for the accounts and label the 'cost of goods manufactured' and 'cost of goods sold' amounts.

1 PROBLEM 2: The following selected data were taken from the records of the Bixby Box Company. The company uses a job costing system to account for its manufacturing costs. Bixby's fiscal year runs from January 1 to December 31; manufacturing overhead is closed out only at the end of the fiscal year. The following information relates to August operations.

(1.) Jobs in process on August 1.

(2.) Jobs completed during August: W12, X13, Y14. (3.) Material requisitions and labor time tickets indicated the following:

(4.) Jobs sold during August: W12, X13. (5.) Bixby applies overhead to production based upon labor costs. (6.) Selected account balances on August 1 were:

(7.) Various overhead incurred (excluding indirect materials and indirect labor) during August, $13,500. (8.) Materials (direct and indirect) purchased during August, $10,905.

Required: (a) What is the balance in the Material Inventory account on August 31? (b) Is the manufacturing overhead account over-or underapplied on August 31? By how much? (c) Compute the cost of goods manufactured for August. (d) Compute the cost of goods sold for August. (e) What is the balance of the Work-in-Process Inventory account on August 31?

2 PROBLEM 3: Shawano Corporation applies overhead based upon machine- hours. Budgeted factory overhead was $266,400 and budgeted machine- hours were 18,500. Actual factory overhead was $287,920 and actual machine-hours were 19,050. Before disposition of over- or underapplied overhead, the cost of goods sold was $560,000 and ending inventories were as follows:

Required: a. Compute the amount of overhead applied to production. b. Prepare the journal entry to dispose of the over/under-applied overhead using the write-off to cost of goods sold approach. c. Prepare the journal entry to dispose of the over/under-applied overhead using the proration approach.

PROBLEM 4: Danner Corporation applies overhead based upon machine- hours. Budgeted factory overhead was $375,000 and budgeted machine- hours were 12,500. Actual factory overhead was $387,920 and actual machine-hours were 13,150.

Required: a. Compute the overhead application rate. b. Compute the amount of overhead applied to production. c. Determine the amount of over- or underapplied overhead.

3 SOLUTIONS SOLUTION: SLIPSHOD

Required: Prepare T-accounts for a job order cost system, posting the beginning balances and all transactions for the month. Clearly indicate the ending balances for the accounts and label the 'cost of goods manufactured' and 'cost of goods sold' amounts.

Feedback: Overhead rate: B81: 8,750/7,000 = 125% Labor B83: 11,500/125% = 9,200 Job B83 BWIP: 4,300 + 9,200 + 11,500 = 25,000 Job B81 BWIP: 48,750 - 25,000 = 23,750 Direct Labor: 49,000 - 4,500 indirect = 44,500 Direct Materials: 8,000 + 5,100 + 8,600 + 19,900 + 12,750 = 54,350 Indirect materials: 58,250 - 54,350 = 3,900 Applied OH: 44,500  125% = 55,625 Job B86 labor: 44,500 - (4,000 + 1,700 + 10,500 + 16,750) = 11,550 Cost of Jobs: B80: $5,200 B81: 23,750 + 8,000 + 4,000 + 5, 000 = $40,750 B82: BFG 8,100 - B80 5,200 = $2,900 B83: 25,000 + 5,100 + 1,700 + 2,125 = $33,925 B84: 8,600 + 10,500 + 13,125 = $32,225 B85: 19,900 + 16,750 + 20,937.50 = $57,587.50 B86: 12,750 + 11,550 + 14,437.50 = $38,737.50 COGM: B81 + B83 + B84 = $40,750 + 33,925 + 32,225 = $106,900 COGS: B80 + B81 + B82 + B83 = $5,200 + 40,750 +2,900 + 33,925 = $82,775

4 SOLUTION: BIXBY (a) $7,880 (b) underapplied by $1,900 (c) $27,835 (d) $16,530 (e) $7,020

Feedback: (a) $5,175 + 10,905 - (610 + 370 + 2,780 + 4,050 + 390) = ending balance = $7,880

(b) overhead in Work-in-Process Inventory, August 1: $9,555 - (800 + 1,000) - (1,200 + 1,620) = $4,935; overhead rate = $4,935/$2,820 = 175% of Direct Labor Costs

MOH debits: IM $390 + IL 540 + incurred 13,500 = $14,430

MOH credits: Beg Bal 1,400 + applied 11,130 = $12,530

Ending MOH: $14,430 - 12,530 = $1,900 debit balance: underapplied

(d) W12 + X13: $6,800 + $9,730 = $16,530

(e) Job Z15: Material ($4,050) + Labor ($1,080) + Overhead ($1,890) = $7,020

SOLUTION: SHAWANO (a) $274,320

Feedback: (a) rate = $266,400/18,500 = $14.40/hr; 19,050 hrs  $14.40 = $274,320

(b) actual - applied = $287,920 - 274,320 = $13,600 underapplied

5 SOLUTION: DANNER

(a) $30 per machine hour (b) $394,500 (c) $6,580 overapplied

Feedback: (a) rate = $375,000/12,500 hrs = $30/hr

(b) 13,150  $30 = $394,500

(c) $387,920 actual - 394,500 applied = $6,580 overapplied