MADAWALABU UNIVERSITY, SCHOOL OF BUSINESS AND ECONOMICS
ACCOUNTING AND FINANCE MODULE TEAM
Cost and management accounting I Assignment
Group one
Q1. How are job order and process costing similar? How do they differ?
Q2. What creates the difference between weighted average and FIFO equivalent units of
production? Which EUP calculation more accurately portrays the actual flow of units through a
manufacturing process and why?
Q3. Hogle Company is a manufacturing firm that uses job-order costing. On January 1, the
beginning of its fiscal year, the company’s inventory balances were as follows:
Raw materials . . . . . . . . . . . . . . . . . . . . . . $20,000
Work in process . . . . . . . . . . . . . . . . . . . . 15,000
Finished goods . . . . . . . . . . . . . . . . . . . . . 30,000
The company applies overhead cost to jobs on the basis of machine-hours worked. For the
current year, the company estimated that it would work 75,000 machine-hours and incur
$450,000 in manufacturing overhead cost. The following transactions were recorded for the year:
a) Raw materials were purchased on account, $410,000.
b) Raw materials were requisitioned for use in production, $380,000 ($360,000 direct
materials and $20,000 indirect materials).
c) The following costs were incurred for employee services: direct labor, $75,000; indirect
labor, $110,000; sales commissions, $90,000; and administrative salaries, $200,000.
d) Sales travel costs were incurred, $17,000.
e) Utility costs were incurred in the factory, $43,000.
f) Advertising costs were incurred, $180,000.
g) Depreciation was recorded for the year, $350,000 (80% relates to factory operations, and
20% relates to selling and administrative activities).
h) Insurance expired during the year, $10,000 (70% relates to factory operations, and the
remaining 30% relates to selling and administrative activities).
i) Manufacturing overhead was applied to production. Due to greater than expected
demand for its products, the company worked 80,000 machine hours during the year.
j) Goods costing $900,000 to manufacture according to their job cost sheets were
completed during the year.
k) Goods were sold on account to customers during the year at a total selling price of
$1,500,000. The goods cost $870,000 to manufacture according to their job cost sheets.
Required
1. Prepare journal entries to record the preceding transactions.
2. Post the entries in (1) above to T-accounts (do not forget to enter the opening balances in
the inventory accounts).
3. Is manufacturing overhead under applied or over applied for the year? Prepare a journal
entry to close any balance in the Manufacturing Overhead account to Cost of Goods
Sold. Do not allocate the balance between ending inventories and Cost of Goods Sold.
4. Prepare an income statement for the year and a statement of cost of goods manufactured.
