COST ACCOUNTING BY CARTER

JOB ORDER COSTING

1. Job Order Cost Schedule.
Winkel Woodcrafters produces special-order wood products. The company uses job order
costing for pricing and cost accumulation purposes. The following costs were incurred on two
recent jobs:

Cost Item ............................................ Job Pine-20 Job Birch-10

Direct materials:
Issued............................................. P6,500 P8,000
Returned ........................................ 500 0
Indirect materials used ....................... 500 400
Direct labor ........................................ P9,000 P15,000
Direct labor rate ................................. P9 per hour P10 per hour
Overhead application rate .................. P10 per direct labor hour P15 per direct labor hour

The company adds a 50% markup on cost in determining the amount to charge for each job.

Required: Prepare a schedule showing the cost and the amount to be charged for each job.

SOLUTION

Job Pine-20 Job Birch-10

Direct materials .................................................................... P 6,000 P 8,000
Direct labor .......................................................................... 9,000 15,000
Factory overhead applied .................................................... 10,000 22,500
Total ................................................................................ P 25,000 P 45,500
Allowance for profit and other costs .................................... 12,500 22,750
Amount to be charged .......................................................... P 37,500 P 68,250
COST ACCOUNTING BY CARTER
JOB ORDER COSTING
2. Job Order Cycle Entries.
The following completed cost sheets were prepared for three jobs that were in production during
April in the Special Order Division of Byron Company:
Job 097 Job 781 Job 946
Direct materials ................................................................. P 6,000 P2,700 P4,100
Direct labor ....................................................................... 9,200 7,300 8,200
Applied factory overhead .................................................. 6,900 5,475 6,120
Allowance for commercial expenses and profit................ 11,050 7,738 9,210

On April 1, Job 097 was 75% complete as to materials, labor, and overhead. It was finished
during the month. The other jobs were started and finished during the month. Jobs 097 and 946
were sold on account at the end of the month.

Required: Prepare general journal entries to be recorded in April to accumulate these job costs
for Work in Process as well as for Finished Goods and for the sale of the two jobs.

SOLUTION

Debit Credit
Work in Process .................................................................................. 8,300 *
Materials ........................................................................................ 8,300

Work in Process .................................................................................. 17,800 **

Accrued Payroll ............................................................................. 17,800

Work in Process .................................................................................. 13,320 ***

Factory Overhead Control ............................................................. 13,320

Finished Goods ................................................................................... 55,995

Work in Process ............................................................................. 55,995

Cost of Goods Sold ............................................................................. 40,520

Finished Goods .............................................................................. 40,520

Accounts Receivable ........................................................................... 60,780

Sales ............................................................................................... 60,780

* (.25 x P6,000) + P2,700 + P4,100

** (.25 x P9,200) + P7,300 + P8,200
*** (.25 x P6,900) + P5,475 + P6,120
COST ACCOUNTING BY CARTER
JOB ORDER COSTING
3. Manufacturing Costs.
The work in process account of Meyers Company showed:

Work in Process

Materials P22,000 | Finished goods P68,000

Direct labor 37,000 |
Factory overhead 55,500 |

Materials charged to the one job still in process amounted to $5,000. Factory overhead is applied
as a predetermined percentage of direct labor cost.

Required: Compute the following:

(1) The amount of direct labor cost in finished goods.

(2) The amount of factory overhead in finished goods.

SOLUTION

(1) The amount of direct labor in finished goods:

Finished goods .................................................................................................... P68,000
Materials included in finished goods .................................................................. 17,000
Direct labor and factory overhead in finished goods .......................................... $51,000

Factory overhead charged to work in process P55,500

= = 1.5
Direct labor charged to work in process P37,000

Let x = direct labor in finished goods

2.5x = P51,000 direct labor and factory overhead in finished goods
x = P20,400 direct labor in finished goods

(2) The amount of factory overhead in finished goods:

x = P20,400
1.5x = 1.5(P20,400)
1.5x = P30,600 factory overhead in finished goods
COST ACCOUNTING BY CARTER
JOB ORDER COSTING
4. Flow of Costs Through T Accounts.
The Palmer Company had the following inventories at the beginning and end of July:

July 1 July 31
Materials ............................................................................................ P20,000 P 45,000
Work in process ................................................................................. ? 185,000
Finished goods ................................................................................... 65,000 115,000

During July, the cost of materials purchased was P160,000 and factory overhead of P125,000
was applied at a rate of 75% of direct labor cost. July cost of goods sold was P240,000.

Required: Prepare completed T accounts showing the flow of the cost of goods manufactured
and sold.

SOLUTION
Materials Work in Process
Inv. 20,000 | WIP135,000
Inv. 48,333 ** |FG290,000
Purch. 160,000 | Materials 135,000 |
180,000 | Factory |
45,000 | overhd. 125,000 |
| Labor 166,667 |
| 475,000 |
| 185,000 |

Finished Goods Cost of Goods Sold

Inv. 65,000 | CGS 240,000 FG 240,000 |
WIP 290,000* | |
355,000 | |
115,000 | |

CGA-Canada (adapted). Reprinted with permission.

*Beginning inventory + WIP = Ending inventory + CGS

P65,000 + WIP = P115,000 + P240,000
WIP = P290,000

**Beginning WIP + Mfg. costs = Ending WIP + FG

Beginning WIP + P426,667 = P185,000 + P290,000
Beginning WIP = P48,333
COST ACCOUNTING BY CARTER
JOB ORDER COSTING
5. Job Order Cost Sheet; Over- or Underapplied Overhead.
During June, the following transactions took place at the Cassandran Corp.

June 3 Purchased materials, P30,000.

5 Requisitioned materials from inventory, P20,000 (75% of these were direct; 25%
were indirect). Direct materials of P3,000 and indirect materials of P1,000 were for
Job 00-1. The remainder were for Job 00-2.
7 For Job 00-2, returned P150 of direct materials and P200 of indirect materials.
8 Recorded liabilities for payroll: direct labor, P15,000 and indirect labor, P5,000. Of
the direct labor cost, 60% was for Job 00-1; the remainder was for Job 00-2.
10 Incurred other factory overhead costs, P20,000 (all applicable to Jobs 00-1 and 00-2).
14 Applied overhead at the rate of 200% of direct labor cost to Jobs 00-1 and 00-2,
which were completed and transferred to finished goods account today.

Required: Assuming that Jobs 00-1 and 00-2 were the only jobs during the period and that all
overhead (as recorded above) is the total applicable overhead for these projects:

(1) Prepare a job order cost sheet for each job.

(2) Determine the difference between applied and actual overhead for the month.

SOLUTION

(1)
Job 00-1 Job 00-2
Materials ................................................................................................. P 3,000 P 11,850
Labor ....................................................................................................... 9,000 6,000
Overhead applied .................................................................................... 18,000 12,000
Total cost ................................................................................................. P 30,000 P 29,850

(2) Analysis of Factory Overhead

Incurred:
Indirect materials ............................................................................... P 4,800
Indirect labor...................................................................................... 5,000
Other overhead incurred .................................................................... 20,000 P 29,800
Applied:
Job 00-1 ............................................................................................. P 18,000
Job 00-2 ............................................................................................. 12,000 30,000
Amount overapplied ............................................................................... P (200 )
COST ACCOUNTING BY CARTER
JOB ORDER COSTING
6. Voyager Inc. produces customized vans in a job order shop. On November 1, the following
balances appear in the inventory records:

Finished goods ............................................................................................................. P179,000

Work in process ........................................................................................................... 308,000
Materials ...................................................................................................................... 83,000

The amount in Finished Goods represents P101,000 recorded for Van 175 and P78,000 recorded
for Van 177. The work in process account represents the three vans in process, as follows:
Van 179 Van 180 Van 181
Factory overhead ............................................................... P75,000 P50,000 P25,000
Direct labor ....................................................................... 60,000 40,000 20,000
Direct materials ................................................................. 26,000 7,000 5,000

The following transactions occurred during November:

(a) Purchased materials on account, P80,000.
(b) Requisitioned P60,000 of materials from inventory: P15,000 applied to Van 180, P25,000
to Van 181, and P16,000 to Van 182, a new order; the balance was for indirect materials.
(c) Recorded the liability for the payroll and the labor cost distribution in a single entry: total
payroll, P208,750. Of the payroll cost, 10% applied to Van 179, 20% to Van 180, 35% to
Van 181, 30% to Van 182, and the remainder to indirect labor.
(d) Paid the payroll.
(e) Applied factory overhead at the rate of 150% of direct labor cost.
(f) Completed Vans 179 and 180.
(g) Sold Vans 175, 177, and 180 at 50% over manufacturing costs.

Required: Prepare general journal entries to record these transactions.

SOLUTION
Debit Credit
(a) Materials ..................................................................................... 80,000
Accounts Payable ................................................................. 80,000

(b) Factory Overhead Control .......................................................... 4,000

Work in Process.......................................................................... 56,000
Materials............................................................................... 60,000

(c) Factory Overhead Control .......................................................... 10,437

Work in Process.......................................................................... 198,313
Accrued Payroll.................................................................... 208,750

(d) Accrued Payroll .......................................................................... 208,750

Cash ...................................................................................... 208,750

(e) Work in Process.......................................................................... 297,470

Applied Factory Overhead ................................................... 297,470

(f) Finished Goods ........................................................................... 429,563

Work in Process ................................................................... 429,563

(g) Accounts Receivable .................................................................. 593,063

Sales ..................................................................................... 593,063

Cost of Goods Sold..................................................................... 395,375

Finished Goods .................................................................... 395,375
COST ACCOUNTING BY CARTER
JOB ORDER COSTING
7. Manufacturing Costs.
Teddy Company is to submit a bid on the production of 5,500 vases. It is estimated that the cost
of materials will be P8,500, and the cost of direct labor will be P12,000. Factory overhead is
applied at 50% of direct labor cost in the Molding Department and at P7.50 per direct labor hour
in the Finishing Department. Of the above direct labor, it is estimated that 500 direct labor hours
at a cost of P4,000 will be required in Finishing. The company wishes a markup of 100% of its
total production cost.

Required: Determine the following:

(1) Estimated cost to produce.

(2) Estimated prime cost.
(3) Estimated conversion cost.
(4) Bid price.

SOLUTION

(1) Materials ........................................................................................................ P 8,500

Direct labor .................................................................................................... 12,000
Factory overhead:
Molding (50% x P8,000) .......................................................................... 4,000
Finishing (500 DLH x P7.50) ................................................................... 3,750
Estimated cost to produce .............................................................................. P 28,250

(2) Materials ........................................................................................................ P 8,500

Direct labor .................................................................................................... 12,000
Estimated prime cost...................................................................................... P 20,500

(3) Direct labor .................................................................................................... P 12,000

Factory overhead ........................................................................................... 7,750
Estimated conversion cost ............................................................................. P 19,750

(4) Estimated cost to produce .............................................................................. P 28,250

Markup (P28,250 x 100%) ............................................................................ 28,250
Bid price......................................................................................................... P 56,500