Job Order Costing
This document is the subsidiary ledger for Work in Process and accumulates DM, DL, and applied MOH by job.
What is a job cost sheet?
The formula for the predetermined overhead rate.
What is the estimated annual overhead cost ÷ the estimated annual operating activity?
Complete the logic: Products consume activities, and activities consume ________.
What are resources?
Identify the inventory account to which costs are transferred when goods are completed.
What is Finished Goods Inventory?
Name one weakness of plantwide or departmental rates in complex, automated settings.
What is distorted costs (overcost simple/high-volume, undercost complex/low-volume)?
These two cost elements are traced to jobs, while manufacturing overhead is applied.
What are direct materials and direct labor?
Name when the predetermined OH rate is set.
What is before the year begins (during budgeting)?
Name one advantage of ABC over plantwide/departmental methods.
What is more accurate product costing and better decision-making via multiple cost pools?
State whether indirect materials are charged to MOH or WIP when used.
What is Manufacturing Overhead?
Estimated OH $500,000; estimated machine hours 100,000. Compute the plantwide rate.
What is $5 per machine hour?
In a job order system, products are made to customer specifications. Name one kind of business that typically uses this system.
Custom
Estimated OH $400,000; estimated DLH 50,000. Compute the rate and the applied OH for a job with 200 DLH.
What are $8 per DLH and $1,600 applied?
Give one example of a cost driver used in ABC.
What is number of setups (or inspections, material moves, design changes, etc.)?
Create the entry to apply overhead to production for $18,600.
What is Dr Work in Process 18,600; Cr Manufacturing Overhead 18,600?
Dept A OH $400,000 over 80,000 MH; Dept B OH $200,000 over 125,000 DLH. Compute each departmental rate.
What are $5.00 per MH (A) and $1.60 per DLH (B)?
A job used DM $4,500, DL $3,200, and 200 DLH. The OH rate is $10 per DLH. State the total job cost.
What is $9,700? (Applied OH = 200×$10 = $2,000; total = 4,500+3,200+2,000)
Applied OH this year was $350,000; actual OH was $370,000. State whether OH is over- or underapplied and by how much.
What is underapplied by $20,000?
Inspection pool = $120,000 for 6,000 inspections. Compute the activity rate.
What is $20 per inspection?
Create the journal entry for the following event: Actual OH incurred: Utilities Payable $15,000; Depreciation $25,000.
What is Dr Manufacturing Overhead 40,000; Cr Utilities Payable 15,000; Cr Accumulated Depreciation 25,000?
Departmental rates are $6.25 per MH in Dept A and $1.90 per DLH in Dept B. Compute the overhead assigned to a product requiring 4 MH in A and 3 DLH in B.
What is $30.70? (4×$6.25 = $25.00; 3×$1.90 = $5.70; total = $30.70.)
Give one reason companies use predetermined overhead rates instead of waiting for actual OH.
X
When OH is underapplied, indicate the closing entry impact on Cost of Goods Sold (increase or decrease).
What is increase Cost of Goods Sold?
Setups: $90,000 for 300 setups. Inspections: $60,000 for 600 inspections. Product A uses 150 setups and 200 inspections. Compute total OH assigned to Product A.
What is $65,000? (Setups $300×150 = $45,000; Inspections $100×200 = $20,000)
Create the closing entry to correct the overapplied manufacturing overhead of $15,000
What is Dr Manufacturing Overhead 15,000; Cr Cost of Goods Sold 15,000?
State why ABC typically assigns higher OH to low-volume custom products relative to plantwide/departmental methods.
What is greater consumption of diverse, cost-driving activities (setups/engineering), which ABC captures with multiple pools?