Test 1 Study Examples Chapters 3 6 Job Costing Comprehensive Example Southwestern Homes which uses a job order costing system had two jobs in process at the start of the year Job No 101 102 The following information is available DM Cost DL Cost OH Applied 40 000 20 000 168 000 107 000 45 000 32 000 83 000 55 000 The company uses normal costing and applies overhead on the basis of direct labor hours Budgeted overhead and labor activity for the year were anticipated to be 1 680 000 and 32 000 hours respectively The company worked on four jobs during the first quarter Direct materials used direct labor incurred and direct labor hours consumed were as follows DM Cost 42 000 48 000 88 000 30 000 DL Cost DL Hours 70 000 2 400 44 000 1 400 130 000 4 000 17 600 1 000 Overhead during the first quarter included charges for depreciation 68 000 indirect labor 120 000 indirect materials used 10 000 and other overhead costs 279 000 paid in cash Southwestern Homes completed job no 101 and job no 102 Job no 102 was sold on account producing a profit of 69 400 for the firm Job No 101 102 103 104 1 Determine the predetermined overhead rate we will be using normal costing OH rate 1 680 000 32 000 hours 52 50 DLH Use this rate to calculate the OH applied for each job DL hours OH rate Beg 168 000 107 000 275 000 Job No 101 102 103 104 WIP Inventory 168 000 406 000 107 000 272 500 208 000 261 600 462 000 528 100 DM Cost 42 000 48 000 88 000 30 000 208 000 DL Cost OH Applied 70 000 126 000 44 000 73 500 130 000 210 000 17 600 52 500 462 000 261 600 Total Where 406 000 FG 27 3 272 500 COGS 15 9 428 000 WIP 56 8 100 100 WIP COGS MOH 272 500 Actual Applied 477 000 462 000 FG Inventory 406 000 272 500 406 000 272 500 272 500 15 000 under applied 2 Prepare the following journal entries a Issuance of direct material to jobs WIP Inventory DM Inventory 208 000 208 000 b Use of direct labor in the process 261 000 WIP Inventory Wages Payable c Application of overhead to jobs 261 000 WIP Inventory MOH 462 000 462 000 d The overhead incurred during the quarter MOH 477 000 Accumulated Depreciation 68 000 120 000 Salary Payable 10 000 DM Inventory 279 000 Cash e Completion of Job 101 and 102 FG Inventory WIP Inventory 678 500 678 500 f Sale of Job 102 Sales Revenue 272 500 272 500 A R 3 Determine the cost of jobs still in process Jobs 103 and 104 428 000 100 100 528 100 4 Adjust for MOH being under applied a to COGS only 15 000 COGS MOH b to COGS WIP and FG 15 000 COGS WIP FG MOH 2 385 8 520 4 095 15 000 15 000 15 9 15 000 56 8 15 000 27 3 Activity Based Costing Example Single Rate v ABC Company XYZ has two products Deluxe and Standard The annual production of Deluxe is 750 units and Standard is 1500 units The company has traditionally used direct labor hours as the basis for applying all manufacturing overhead to products Deluxe requires 0 4 direct labor hours per unit and Standard requires 0 6 direct labor hours per unit The total estimated overhead for next period is 113 791 Activity Cost Pools activity measures Machine related machine hours Batch setup setups General factory direct labor hours Estimated Overhead Cost 46 207 37 001 30 583 113 791 Standard 400 400 600 Deluxe 1200 1800 600 1 Under the volume based costing using a single rate for the entire plant Total 1600 2200 1200 Expected Activity determine the following a The overhead rate based on direct labor hours b The overhead cost per unit of Deluxe c The overhead cost per unit of Standard 2 Under the activity based rates determine the following a The activity based rates for assigning overhead costs to the two products b The overhead cost per unit of Deluxe c The overhead cost per unit of Standard Solution 1a OH rate Total estimated OH 113 791 94 83 DL hour Total DL Hours 1200 OR Standard units DLH unit rate Deluxe units DLH unit rate 1500 6 750 4 Total estimated OH 113 791 94 83 DL hour 1b Deluxe OH cost unit OH rate DLH unit rate 94 83 DLH 0 4 DLH unit 37 93 1c Standard OH cost unit OH rate DLH unit 94 83 DLH 0 6 DLH unit 56 90 2a Activity based rates Machine related 46 207 1600 machine hours 28 88 machine hour Batch setup 37 001 2200 setups 16 82 setup General factory 30 583 1200 DLH 25 49 DLH 2b Deluxe Machine related 1200 28 88 machine hour Batch setup 1800 16 82 setup General Factory 600 25 49 DLH Total OH cost unit 106 25 2c Standard Machine related 400 28 88 machine hour Batch Setup 400 16 82 setup General Factory 600 25 49 DLH Total OH cost unit 22 83 34 656 30 276 14 754 79 686 750 units 11 552 6 728 15 294 33 574 1500 units Materials 16 000 50 complete Conversion 4 000 15 complete Process Costing Example 1 FIFO Company XYZ uses process costing The beginning WIP in the first processing department consisted of 800 units The costs and percentage completion of these units in beginning inventory are A total of 10 600 units were started and 7 600 units were transferred to the second processing department during the month The following costs were incurred in the first processing department during the month Material costs 220 100 Conversion costs 250 400 The ending WIP was 75 complete for material and 15 complete for conversion Compute the Transferred Out Cost 800 10 600 7 600 3 800 Physical Units Beginning Balance Transfers In Transfers Out Ending Balance 50 Material 15 Conversion 6 800 100 M 100 C 800 50 M 85 C 75 Material 15 Conversion 50 Material 85 Conversion Material and Conversion percentages 100 50 100 15 We use 100 because know these units were 100 complete when transferred out Compute Total EUs Total EUs for Materials Total EUs for Conversion Compute Per Unit Cost WIP Inventory Dept 1 410 383 16 000 4 000 220 100 250 400 80 117 Transferred Out Cost 800 units 16 000 4 000 800 50 21 90 800 85 31 11 6 800 units 6 800 53 01 Total TO Cost Current Costs Divided by EUs Cost per EU Total cost 53 01 800 50 6 800 100 3 800 75 10 050 EUs 800 85 6 800 100 3 800 15 8 050 EUs Materials Conversion 220 100 10 050 EUs 21 90 250 400 8 050 EUs 31 11 49 915 360 468 410 383 Process Costing Example 2 Weighted …