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Job Order Costing System Exercises and Problems:

• Exercise 1--Cost accumulation Procedure Determination
• Exercise 2--Job order cost sheet
• Exercise 3--Job order costing-T Accounts and Journal Entries
• Exercise 4--Job Order Cycle Entries
• Exercise 5--Journal entries, T Accounts, Over and Under applied overhead Income Statement

Exercise 1--Cost accumulation procedure determination:

Classify these industries with respect to the type of cost accumulation procedure generally used--job order costing or process costing.

Solution:

• Job order cost procedure: (e), (f), (g), (i), (j), (k), (p), (q), (r)
• Process costing procedure: (a), (b), (c), (d), (h), (l), (m), (n), (o), (s), (t)

Exercise 2--Job order cost sheet:

Forge Machine Works collects its cost data by the job order cost accumulation procedure. For Job 642, the following data are available:

Solution:

1.

2.

Sales Price of job 642, contracted with a markup of 40% of cost:

Exercise 3--Job order costing:

The Cambridge Company uses job order costing. At the beginning of the May, two jobs were in process:

Solution:

T Accounts

General journal entries to record:

Exercise 4--Job Order Cycle Entries:

Beaver, inc. provided the following data for January, 19B:

Required:

Journal entries, with detail for the respective job orders and factory overhead subsidiary records, to to record the following transactions for the January:

1. Purchase of materials on account.
2. Labor paid.
3. Labor cost distribution.
4. Materials issued.
5. Depreciation for the month.
6. Acquisition of other overhead costs on credit.
7. Overhead applied to production.
8. Jobs completed and transferred to finished goods.
9. Sales revenue.
10. Cost of goods sold.

Solution:

Journal Entries:

Exercise 5 Job Order Costing--Journal Entries, T Accounts, Income Statement

Hogle Company is a manufacturing firm that uses job order costing system. On January 1, the beginning of its fiscal year, the company's inventory balances were as follows:

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

1. Raw materials were purchased on account, $410,000.
2. Raw materials were requisitioned for use in production, $380,000 ($360,000 direct materials and $20,000 indirect materials).
3. The following costs were incurred for employee services: direct labor, $75,000; indirect labor, $110,000; sales commission, $90,000; and administrative salaries, $20,000.
4. Sales travel costs were $17,000.
5. Utility costs in the factory were $43,000.
6. Advertising costs were $180,000.
7. Depreciation was recorded for the year, 350,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).
8. Insurance expired during the year, $10,000 (70% relates to factory operations, and 30% relates to selling and administrative activities).
9. 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.
10. Goods costing $9,00,000 to manufacture according to their job cost sheets were completed during the year.
11. 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 (don't forget to enter the beginning balances in the inventory accounts).
3. Is manufacturing overhead underapplied or overapplied for the year? Prepare journal entry to close any balance in the manufacturing overhead account to cost of goods sold (COGS). Do not allocate the balance between ending inventories and cost of goods sold (COGS).
4. Prepare an income statement for the year.

Solution:

1: Journal Entries

*The predetermined overhead rate for the year would be computed as follows:

Predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated total units in the allocation base

= $450,000 / 75,000 machine-hours

= $6 per machine-hour

Based on the 80,000 machine-hours actually worked during the year, the company would have applied $480,000 in overhead cost to production: 80,000 machine-hours × $6 per machine-hour = $480,000.

2: T Accounts

3: Under or Overapplied manufacturing overhead:

Manufacturing overhead is overapplied for the year. The entry to close it out to cost of goods sold is as follows:

4: Income Statement

You may also be interested in other useful articles from "job order costing system" chapter:

1. Measuring Direct Materials Cost in Job Order Costing System
2. Measuring Direct Labor Cost in Job Order Costing System
3. Application of Manufacturing Overhead
4. Job Order Costing System - The Flow of Costs
5. Multiple Predetermined Overhead Rates
6. Under-applied overhead and over-applied overhead calculation
7. Disposition of any balance remaining in the manufacturing overhead account at the end of a period
8. Predetermined Overhead Rate and Capacity
9. Recording Non-manufacturing Costs
10. Recording Cost of Goods Manufactured and Sold
11. Job Order Costing in Services Companies
12. Use of Information Technology in Job Order Costing
13. Advantages and Disadvantages of Job Order Costing System
14. Job Order Costing Discussion Questions and Answers
15. Job Order Costing Exercises
16. Case Studies

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