DISCUSION QUESTION

19.1.
Factory over head is not identified with specific units (jobs) or batches (job
lotS). Therefore, to assign costs, estimates of the relation between factory overhead cost and job
or job lot are necessary. Also, since job order cost accounting is a perpetual system, we need to
estimate a predetermined overhead rate to compute (perpetual) inventory costs. This estimated
amount also helps job order companies determine prices on a timely basis.

19.3.
The job order cost sheet captures information on cost and quantity of direct material and
direct labor,, and on the amount of factory overhead applied to the respective job or job lot.
Management and employees use this information to monitor costs during production and to
estimate total cost of production.

19.4.
Each job is assigned a subsidiary ledger account. This account serves as the “posting
account” (accumulates all increases and decreases) during production for direct material, direct
labor, and applied factory overhead. The collection of job costs sheets for all of the jobs in process
make up a subsidiary ledger controlled by the Goods in Process Inventory account in the general
ledger.
When a job is finished, its job cost sheet is completed and move from the file of jobs in
process to the file of finished jobs awaiting delivery to customers. This latter file acts as a
subsidiary ledger controlled by the finished goods inventory account. In this way, management
and employees can obtain the costs, direct and indirect, associated with any job or job lot at any
time.

19.6.
The materials requisition sliop is designed to track the movement of materials from raw
materials to production. It also serves as an internal control document because without the slip the
inventory department should not release inventory to production.

19.10.
Cost and benefit is the two essential terminologies which every business takes into
consideration forr assessing the profitabillity and viability of a new proposal. Cost involes the
expenses incurred by the company for producing a particular goods or service or the investment
required to fund a project. However benefit on the other hand refers to the utility or the profit
derived from such investment or incurring the cost.
The production run must be accounted for and taken into consideration as job batch
or lot. Although individual phone manufactured by A can be viewed as single jobs, the cost
pertainning to tracking of such informatino in detail would be more than the benefits derived from
the same. Therefore, determination of the cost pertaining to the batch can be undertaken in
effective manner if suficient information is being provided to the employees and manager
regarding the product for the purpose of decision making.

19.11.
A predetermined factory overhead rate must be calculated for a least two reasons:
1. Not all costs are known in advance, yet the costs must be applied to products during the
current period.
2. A predetermined rate is used to spread indirect costs to products and /or services throughout
an accounting period, where overhead costs are not incurred uniformly throughout the
period and production may not be uniform throughout the period. For instance, property
taxes on the factory building of $22,000 may be paid in July, but some of that $20,000
musg be allocated to all items produced during the year, January through December. A
predetermined rate is necessary, because we must estimate the rate at the beginning of the
year, based on estimated costs and activity, before the period begins.

19.12.
Each patient in a hospital can be viewed as a “job”. In this case, a job order cost sheet would be
used to capture cost of direct materials (supplies, medicine, and so forth), direct labor, and hospital
overhead.

19.13.
Since it has been given in question that the manufactures to be manufactured are custom - made ,
they do not differ in specifications hence job order costing will be used.
 Quick suty

19.1
1. Hats imprinted with companyy logo Job lots
2. Little League trophies Job lots
3. A handcrafted table Job
4. A 90 – foot motor yacht Job
5. Wedding dresses for a chain of stores Job lots
6. A custom – designed home Job

19.2
Debit Credit
Finished Goods Inventory $10,500
Goods in process inventory $10,500
Cash $14,900
Sales Revenue $14,900

19.3
a. Heterogeneous products and servieces J
b. Rountine, repetitive procedures P
c. Low product flexibility J
d. Low production volume J
e. Low production standardization P

19.4
Debit Credit
Raw material inventory 50,000
Cash 50,000
Factory supplies 12,000
Raw material inventory 12,000
Work - in - process inventory 32,000
Raw material inventory 32,000
19.6

Direct labor :$468,000

Direct material :$390,000

Manufactured overhead :$117,000

POHRdirect labor=117,000/468,000=25%

POHRdirect material=117,000/390,000=30%

19.7
Overhead applied to Job 65A = Overhead cost x (Machine Hours in January / Total Machine hours)
= $560,000 x 13/1,400
= $5,200
Therefore, over 19head applied to Job 65A is $5,200.
19.8
$1,170,000
Predeterminde overhead rate = × 100% = 130%
$900,000

19.11

Actual overhead: $950,000

Overhead applied:600,000.150%=$900,000

Actual MOH-MOH applied: 950,000-900,000=$50,000>0

 Underapplied
Exercise :
19-1)
1–c
2–d
3–a
4–e
5–b
19 – 3)
1. Material use in june :
Direct meterial
Job 102 15,000
Job 103 33,000
Job 104 27,000
75,000
2. Labor use during in june :
Direct labor
Job 102 8,000
Job 103 14,200
Job 104 21,000
43,200
3. Predetermined overhead rate:

POHR = applied overhead : actual direct labor

= 21,600 : 43,200
= 0,5 ( 50%)
4. Total cost :
Direct material 75,000
Direct labor 43,200
Applied overhead 21,600
Total cost 139,800
19 – 5)
a) Work in process inventory 9,500
Raw material inventory 9,500
b) Factory overhead 8,000
Factory wages payable 8,000
c) Work in process 6,400
Manufactury overhead 6,400
d) Work in process 22,000
Finished good 22,000
e) Cost of good sold
 Finished good
19 – 6)
1. Raw meterial investory 76,000
Accounts payable 76,000
2. Work in process investory 48,000
Raw meterial investory 48,000
3. Factory overhead 15,300
Factory wages payable 15,300
4. Work in process inventory 18,420
Factory overhead 18,420
19 – 7)
1. Cost of direct material used:

Raw materials (apprii 30) 43,000

Raw meterials purchases 210,000
253,000
Raw meterial (may 31) 52,000
201,000
Indirect material 15,000
Direct material used 186,000

2. Cost of direct labor used :

Factory payroll 345,000
Indirect labor 80,000
Direct labor used 265,000

3. Cost of good manufactured

MOH = 70% x 265
= 185,5

Direct material use 186,000

Direct labor use 265,000
Manufactured overhead 185,500
work in process (apprill 30) 10,200
646,700
work in process (may 31) 21,300
cost of good manufactured 625,400
4. Cost of good sold
Cost of good manufactured 625,400
Finished goods (appril 30) 63,000
688,400
Finished goods (may 31) 35,600
Cost of good sold 652,800

5. Gross profit
Sale 1,400,000
Cost of good sold 652,800
Gross profit 747,200
 6. It is underapplied overhead
215,000 – 185,500 = 29,500
19 – 8)
1. Raw meterial 201,000
Cash 201,000
2. Work in process invrntory 186,000
Raw material investory 186,000
3. Factory overhead 15,000
Raw material investory 15,000
19 – 9 )
1. Work in process inventory 265,000
Factory wages payable 265,000
2. Factory overhead 80,000
Raw material investory 80,000
19 – 10)

Debit Credit
(1)
Factory overhead 120,000
Other accounts 120,000
To record other overheads of the
factory
(2)
WIP inventory ($265,000 x 0.70) 185,500
Factory overhead 185,500
To record overhead applied to the jobs

19 – 20)

a Raw materials inventory 3,108

accounts payable 3,108
To record raw material purchases
b
Goods in Process inventory 3,106
Raw materials inventory 3,106
To record raw materials used in production
 Problem
19.1
POHR 0.5
1) job306 job307 job308
Balances on March 31
DM 29000 35000
DL 20000 18000
Applied overhead 10000 9000
Cost during April
DM 135000 22000 100000
DL 85000 150000 105000
Applied overhead 42500 75000 52500
total cost (April) 262500 247000 257500
total cost (include March 31) 321500 309000 257500

2)
a) Raw material 50000
AP 50000
b) WIP 455000
Raw materials 455000
c) WIP 340000
Wages payable 340000
d) factory overhead 23000
Wages payable 23000
e) WIP 175000
Actual overhead 175000
f) Actual overhead 51000
cash 51000
WIP 124000
Actual overhead 124000
g) Finished Goods 828500
(job306+job307) WIP 828500
h) COGS 262500
Finished Goods 262500
i) Account receivable 635000
sales 635000
j) Applied overhead 170000
Actual overhead 175000
underapplied 5000
COGS 5000
 Factory overhead 5000

3) Marcelino CO.
Schedule of COGM
for month end April 30
Direct materials 455000
Direct labor 340000
Factory overhead applied 170000
total manufacturing costs 965000
Add: WIP , March 31 121000
total costs of WIP 1086000
Less: WIP,May 31 257500
costs of goods manufactured 828500

4) Gross profit= sales-COGS 372500

Marcelino CO.
Balance sheet
for month end of April 30

current asset
raw materials inventory 125000
Work in process inventory 378500
Finished goods inventory 445000

5) overapplied is closed to COGS

19.2

POHR 2
1)
a) WIP 28800
raw materials 28800
b) WIP 59800
Wages payables 59800
c) WIP 13800
factory overhead 13800
d) factory overhead 5600
raw materials 5600
e) factory overhead 8200
Wages payables 8200

2)
overhead applied 11500
 revised overhead 128800
underapplied 13800
COGS 13800
factory overhead 13800

3) Trail balance debit credit

cash 170000
AR 75000
Raw materials inventory 45600
WIP inventory 102400
Finished goods inventory 1200
prepaid rent 3000
AP 17000
NP 25000
Factory wages payable 68000
common stock 50000
Retained earning 271000
sales 373000
COGS 231800
factory overhead 115000
Operating expense 60000
Totals 804000 804000
4) BERGAMO BAY
income statement
for year ended dec 31
sales
COGS
Finished goods inventory 1200

19.3
POHR 2
1) job code sheet
Job no. 136 137 138 139 140
Materials 48000 32000 19200 22400 6400
labor 12000 10500 37500 39000 3000
overhead 24000 21000 75000 78000 6000

Total cost 84000 63500 131700 139400 15400

2)
a) raw materials 200000
account payable 200000
b) WIP 128000
Factory overhead 19500
 raw material 147500
c) Factory overhead 15000
cash 15000
d) WIP 102000
Factory overhead 24000
Wages payable 126000
e) WIP(job 136) 24000
FO 24000
WIP(job 138) 75000
FO 75000
WIP( job 139) 78000
FO 78000
f) Finished goods 24000
WIP(job 136) 24000
Finished goods 75000
WIP(job 138) 75000
Finished goods 78000
WIP(job 139) 78000
g) Account receivble 525000
sales 525000
COGS( job 136+138) 99000
finished good 99000
h) depreciation on factory building 68000
depreciation on factory equipment 36500
Expired factory insurance 10000
Accurued propety taxes payable 35000
FO 149500
i) WIP( job 137) 21000
FO 21000
WIP ( job 140) 6000
FO 6000

19.4
1) direct labor cost 2500000
a) POHR applied 0.6
b) job no. 201 202 203 204 205 206
604000 563000 298000 716000 314000 17000
applicated manufactured overhead 362400 337800 178800 429600 188400 10200
total 1507200
c) underapplicated 12800

2) COGS 12800
manufactured overhead 12800
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