Exercise Set B

LO 4.1Abuah Goods manufactures clothing. For each item listed, identify whether it is a product cost, a period cost, or not an expense.

1. pins to keep materials together while garment is being manufactured
2. real estate taxes on store
3. advertising expense
4. product inspector wages
5. shirts for sale
6. Chief Financial Officer salary
7. cost of goods sold

LO 4.2Choco’s Chocolates incurs the following costs for the month:

1. What is the prime cost?
2. What is the conversion cost?

LO 4.2The table shows a list of expenses involved in the production of custom snowboard bindings.

1. For each item listed, state if the cost is manufacturing or sales and administration.
2. If the cost is a manufacturing cost, state if it is direct materials, direct labor, or manufacturing overhead.
3. If the cost is a manufacturing overhead cost, state if it is indirect materials, indirect labor, or another type of manufacturing overhead.

LO 4.3Masonry’s records show the raw materials inventory had purchases of $1,000 and an ending raw materials inventory balance of $200. If the cost of materials used during the month was $900, what was the beginning inventory?

LO 4.3Steinway’s records show their work in process inventory had a beginning balance of $3,000 and an ending balance of $3,500. How much overhead was applied if the records also show the following:

LO 4.3Langston’s purchased $3,100 of merchandise during the month, and its monthly income statement shows a cost of goods sold of $3,000. What was the beginning inventory if the ending inventory was $1,250?

LO 4.4A company estimates its manufacturing overhead will be $840,000 for the next year. What is the predetermined overhead rate given each of the following independent allocation bases?

1. Budgeted direct labor hours: 90,615
2. Budgeted direct labor expense: $750,000
3. Estimated machine hours: 150,000

LO 4.4Job order cost sheets show the following costs assigned to each job:

The company assigns overhead at twice the direct labor cost. What is the total cost for each job?

LO 4.4A new company started production. Job 1 was completed, and Job 2 remains in production. Here is the information from the job cost sheets from their first and only jobs so far:

Using the information provided,

1. What is the balance in work in process?
2. What is the balance in finished goods inventory?
3. If manufacturing overhead is applied on the basis of direct labor hours, what is the predetermined overhead rate?

LO 4.5Inez has the following information relating to Job AA5. Direct material cost was $200,000, direct labor was $36,550, and overhead applied on the basis of direct labor hours was $73,100. What was the predetermined overhead rate using the labor rate of $17 per hour?

LO 4.6A company has the following information relating to its production costs:

Compute the actual and applied overhead using the company’s predetermined overhead rate of $23.92 per machine hour. Was the overhead overapplied or underapplied, and by how much?

LO 4.7A company has the following transactions during the week.

• Purchase of $3,000 raw materials inventory
• Assignment of $700 of raw materials inventory to Job 7
• Payroll for 10 hours and $3,000 is assigned to Job 7
• Factory depreciation of $1,750
• Overhead applied at the rate of $200 per hour

What is the cost assigned to Job 7 at the end of the week?

LO 4.7During the month, Job Arch2 used specialized machinery for 350 hours and incurred $700 in utilities on account, $400 in factory depreciation expense, and $200 in property tax on the factory. Prepare journal entries for the following:

1. Record the expenses incurred.
2. Record the allocation of overhead at the predetermined rate of $1.50 per machine hour.

LO 4.7Job 113 was completed at a cost of $7,500, and Job 85 was completed at a cost of $2,300 and sold on account for $4,500. Prepare journal entries for the following:

1. Completion of Job 113.
2. Completion and sale of Job 85.

LO 4.7A company’s individual job sheets show these costs:

Overhead is applied at 1.75 times the direct labor cost. Use the data on the cost sheets to perform these tasks:

1. Apply overhead to each of the jobs.
2. Prepare an entry to record the assignment of direct material to work in process.
3. Prepare an entry to record the assignment of direct labor to work in process.
4. Prepare an entry to record the assignment of manufacturing overhead to work in process.

LO 4.7A summary of materials requisition slips and time tickets, along with the overhead allocation, show these costs:

1. Prepare an entry to record the assignment of direct material to work in process.
2. Prepare an entry to record the assignment of direct labor to work in process.
3. Prepare an entry to record the assignment of manufacturing overhead to work in process.