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Job-Order Costing

2010 The McGraw-Hill Companies, Inc.

Most appropriate costing system:

Service / Product System Physical therapy clinic Graphic design studio Auto repair shop Local bakery Whole milk dairy Automobile manufacturing Satellite Launch Service ( S!"#s$ Costing Job costing Job costing Job costing Batch costing Process costing Batch costing Job costing

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Exercise 2
Lowes Pottery Barn had the following costs for June:
Category %irect labour )anufacturing overhead Beginning W P .nding W P /ost of goods manufactured Beginning finished goods .nding finished goods Calculate how much direct material costs were incurred during June. Cost (Rs.) &'(''' *+(,-' ' ' -&(-'' *&&(-'' *,'('''

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Exercise 3
Walter Meyer Productions had the following costs for March:
Category Cost ($)

Purchases of direct materials ndirect labour .nding direct materials inventory Beginning direct materials inventory 1otal manufacturing costs %irect labour

0'(''' &'(''' *'(''' ' **-(''' &-('''

How much manufacturing overhead was incurred during March?

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Exercise
Estimated cost and operating data for three companies for the upcoming year follow:
Company X %irect labour hours )achine hours %irect material hours )anufacturing overhead cost +'(''' 0'(''' 42''(''' 4-03(''' Company Y 2-(''' ,'(''' 4&5'(''' 40*-(''' Company Z 3'(''' &*(''' 40''(''' 42+'('''

Predetermined overhead rates are computed using the following allocation bases in the companies: 1. Company X . Direct labour hours 2. Company Y . Machine hours 3. Company Z . Direct materials cost

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Exercise
Calculate: 1. Compute each companys predetermined overhead rate. 2. Assume that Company X works on three jobs during the upcoming year. Direct labour hours recorded by job are: Job 417, 12,000 hours; Job 418, 36,000 hours; and Job 419, 30,000 hours. How much overhead will the company apply to WIP for the year? If actual overhead costs total $530,000 for the year, will overhead be under-applied or over-applied? By how much?

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Exercise 4
Rabbit Enterprises calculates predetermined overhead rates for each department. In the feeding department, total overhead costs were $19,240 in 2008, and they are expected to be $21,700 in 2009. The company maintained 515 rabbit pens in 2008 and plans to have 520 pens in 2009. Calculate: 1. If the number of rabbit pens is used as the cost driver, what is the companys 2009 predetermined overhead rate? 2. What amount of overhead was applied in 2009 if there were actually 530 pens?

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Exercise 5
Ben Whitney manufactures holiday decorations. Overhead is applied to products based on the direct labour hours. Last year, total overhead costs were expected to be $84000. Actual overhead costs totaled $88750 for 8400 actual hours. At the end of the year, overhead was under-applied by $4750. Calculate: 1. The predetermined overhead rate. 2. How much overhead should have been applied to a job that was completed in three direct labour hours?

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Exercise 6
Waheed Company uses normal costing. It allocates manufacturing overhead costs using a budgeted rate per machine hour. The following data are available for 2006:

Category Budgeted manufacturing o6h costs Budgeted machine hours Actual manufacturing overhead costs Actual machine hours

Costs ($) &(+-'(''' *5'(''' &(5*'(''' *5-('''

Calculate: 1. Calculate the budgeted manufacturing overhead rate. 2. Calculate the manufacturing overhead allocated during 2006. 3. Calculate the amount of under- or over-allocated manufacturing overhead.

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Exercise 7
Krall Cabinets produces custom cabinetry for homes, which is sold nationwide. The company adds overhead costs to cabinetry projects at the rate of $7.75 per direct labour hour. The company accumulates overhead costs in a separate manufacturing overhead account and uses normal costing to assign overhead. The following data provide details of the companys activity and balances during last 6 months. Category July !ec " %irect materials inventory Work in process inventory 7inished goods inventory )onthly production data8 %irect materials purchased %irect labour costs (4*-6hour$ 4*--(''' 4&,'(''' 43'(&-' 22(''' &2(*-' 43*(,-' 20(-'' &0('''

Calculate: 1. Cost of direct materials & COG manufactured during the period. 2. At the end of the December, Krall found that it had actually incurred overhead costs of $145,000. If Krall adjusts its overhead to COGS, what is Kralls COGS after adjustments?
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End of Chapter

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