Job costing
1. Moody Corporation uses a Job order costing system with a plant-wide overhead rate based on
machine-hours. At the beginning of the year, the company made the following estimates:
Machine-hours required to support the estimated production……………100,000
Fixed manufacturing overhead cost……………………………………………………$650,000
Variable manufacturing overhead cost per machine hour………………….. $3.00
Required: (a) Compute the pre-determined overhead rate.
(b) During the year Job 400 was started and completed. The following information was available
with respect to this Job: Direct material ……………………………………$450
Direct labor cost…………………………………………..$210
Machine-hours used…………………………………… 40
Compute the total manufacturing cost assigned to Job 400.
(c) During the year, the company worked a total of 146,000 machine-hours on all jobs and
incurred actual manufacturing overhead costs $1350,000. What was the amount is of under
applied and over applied overhead for the year? If this amount were closed out entirely to cost
of goods sold, would the journal entry increase or decrease the operating income?
2. White Company has two departments, Cutting and Finishing. The company uses a Job-order costing
system and computes a predetermined overhead rate in each department. The cutting department
bases its rate on machine hours and the Finishing department bases its rate on direct labor hours. At the
beginning of the year, the company made the following estimates:
Cutting Finishing
Direct labor-hours…………………………………………………………………… 6,000 30,000
Machine-hours………………………………………………………………………… 48,000 5,000
Total fixed manufacturing overhead cost……………………………….. $264,000 $366,000
Variable manufacturing overhead per machine-hour……………….. $2.00 -
Variable manufacturing overhead per direct labor-hour……………. - $4.00
Required: (a) Compute the predetermined overhead rate to be used in each department.
(b) Assume that the overhead rates that you computed in (a) above are in effect. The Job cost sheet for
Job 203, which was started and completed during the year, showed the following:
Cutting Finishing
Direct labor-hours……………………………………………………………… 6 20
Machine-hours………………………………………………………………….. 80 4
Materials…………………………………………………………………………… $500 $310
Direct labor cost………………………………………………………………. $70 $150
Compute the total manufacturing cost assigned to Job 203.
(c) Would you expect substantially different amounts of overhead cost to be assigned to some jobs if
the company used a plant wide-overhead rate based on direct labor-hours, rather than using
departmental rates? Explain. No computations are necessary.
3. Mullin Machine works collects its cost data by the Job order cost accumulation procedure. For Job
909, the following data are available:
Direct materials Direct Labor
9/14 Issued………………$600 Week of September 20….. 90 hours @6.20 per hour
9/20 issued……………….$331 Week of September 26….70 hours @7.30 per hour
9/22 Issued ………………$200
Factory overhead is applied at the rate of $5 per direct labor hour.
Required:
(a) Enter the appropriate information on a Job order cost sheet.
(b) Determine the sales price of the job, assuming that it was contracted with a markup of 40% of
cost.
4. Hellman Corporation uses job order costing and has two production departments, M and A. Budgeted
manufacturing costs for 2022 were as follows:
Department M Department A
Direct materials………………………………………………….. $700,000 $100,000
Direct labor…………………………………………………………. 200,000 800,000
Factory overhead………………………………………………… 600,000 400,000
The actual materials charged to job 432 during 2022 were as follows:
Direct materials……………………………………………………………………………..$25,000
Direct labor:
Department M……………………………………………………….$8,000
Department A………………………………………………………$12,000
__________ 20,000
Hellman applied factory overhead to production orders on the basis of direct labor cost, using
departmental rate predetermined at the beginning of the year on the basis of annual budget.
Required: Determine the manufacturing cost associated with job 432 of 2022.
