Concept explainers
(a)
The job order cost accounting system is also used by service business. But the usage of job order cost system by service business for the service provided to the business. The service business which is using job order costing provides services which are unique to each customers with related costs that are very importance with each customer.
To record:
(a)
Answer to Problem 15E
The journal entries for each transaction is prepared as follows:
Date | Account titles and Explanation | Debit ($) | Credit ($) | |||||
July | 03 | Work in process (175 hours × $150) | 26,250 | |||||
Salaries Payable | 26,250 | |||||||
(Record charges for professional services) | ||||||||
July | 10 | Work in process | 12,500 | |||||
Cash | 12,500 | |||||||
(Record reimbursement of travel costs) | ||||||||
July | 14 | Work in process (260 hours × $185) | 48,100 | |||||
Salaries Payable | 48,100 | |||||||
(Record professional charges) | ||||||||
July | 18 | Work in process | 30,000 | |||||
Consultant fees payable | 30,000 | |||||||
(Record invoice for expert testimony) | ||||||||
July | 27 | Work in process (435 hours × $62) | 26,970 | |||||
Office overhead | 26,970 | |||||||
(Record factory overhead applied) | ||||||||
July | 31 | Office overhead | 28,500 | |||||
Cash | 28,500 | |||||||
(Record administrative and support salaries paid) | ||||||||
July | 31 | Office overhead | 4,000 | |||||
Supplies | 4,000 | |||||||
(Record office supplies used) | ||||||||
July | 31 | Salaries payable | 74,350 | |||||
Cash | 74,350 | |||||||
(Record payment of professional salaries) | ||||||||
July | 31 | 172,500 | ||||||
Fees earned | 172,500 | |||||||
(Record payment of professional salaries) | ||||||||
July | 31 | Cost of services (1) | 143,820 | |||||
Work in process | 143,820 | |||||||
(Record cost of services for the month) |
Table (1)
Explanation of Solution
Working note:
The cost of services is calculated as follows:
(b)
To calculate: if the factory overhead is under-applied or over-applied.
(b)
Answer to Problem 15E
The under (or) over applied overhead is calculated as follows:
Particulars | Amount ($) |
Office overhead incurred (2) | 32,500 |
Less: Office overhead applied | 26,970 |
Underapplied overhead | 5,530 |
Table (2)
Explanation of Solution
Working note:
The overhead incurred is calculated as follows:
The factory overhead is under applied by $5,530.
(c)
gross profit for the service provided for O case.
(c)
Answer to Problem 15E
Answer:
The gross profit is calculated as follows:
Particulars | Amount ($) |
Fees earned | 172,500 |
Less: Cost of services (2) | 149,350 |
Gross Profit | 23,150 |
Table (3)
Explanation of Solution
Working note:
The cost of services is calculated as follows:
Gross profit for the service is $23,150.
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Chapter 2 Solutions
Managerial Accounting, Loose-leaf Version
- JOB ORDER COSTING TRANSACTIONS Stonestreet Enterprises makes garage doors. During the month of February, the company had four job orders: 205, 206, 207, and 208. Overhead was applied at predetermined rates, while actual factory overhead was recorded as incurred. All four jobs were completed. (a) Purchased raw materials on account, 44,000. (b) Issued direct materials to production: (c) Issued indirect materials to production, 5,700. (d) Incurred direct labor costs: (e) Charged indirect labor to production, 3,400. (f) Paid electricity, heating oil, and repair bills for the factory and charged to production, 5,300. (g) Applied factory overhead to each of the jobs using a predetermined factory over-head rate as follows: (h) Finished Job Nos. 205-208 and transferred to the finished goods inventory account as products L, M, N, and O, respectively. (i) Sold products L, M, N, and O, on account, for 21,000, 20,300, 19,000, and 20,500, respectively. REQUIRED 1. Prepare general journal entries to record transactions (a) through (i). Make compound entries for (b), (d), and (g), with separate debits for each job. 2. Post the entries to the work in process and finished goods T accounts only.arrow_forwardJOB ORDER COSTING TRANSACTIONS Stonestreet Enterprises makes garage doors. During the month of February, the company had four job orders: 205, 206, 207, and 208. Overhead was applied at predetermined rates, while actual factory overhead was recorded as incurred. All four jobs were completed. (a) Purchased raw materials on account, 44,000. (b) Issued direct materials to production: (c) Issued indirect materials to production, 5,700. (d) Incurred direct labor costs: (e) Charged indirect labor to production, 3,400. (f) Paid electricity, heating oil, and repair bills for the factory and charged to production, 5,300. (g) Applied factory overhead to each of the jobs using a predetermined factory overhead rate as follows: (h) Finished Job Nos. 205208 and transferred to the finished goods inventory account as products L, M, N, and O. (i) Sold products L, M, N, and O, on account, for 21,000, 20,300, 19,000, and 20,500, respectively. REQUIRED 1. Prepare general journal entries to record transactions (a) through (i). 2. Post the entries to the work in process and finished goods accounts only.arrow_forwardJOB ORDER COSTING TRANSACTIONS D K Enterprises makes wicker baskets. During the month of August, the company had four job orders: 501, 502, 503, and 504. Overhead was applied at predetermined rates, while actual factory overhead was recorded as incurred. All four jobs were completed. (a) Purchased raw materials on account, 44,000. (b) Issued direct materials to production: (c) Issued indirect materials to production, 5,000. (d) Incurred direct labor costs: (e) Charged indirect labor to production, 3,300. (f) Paid electricity, heating oil, and repair bills for the factory and charged to production, 5,200. (g) Applied factory overhead to each of the jobs using a predetermined factory overhead rate as follows: (h) Finished Job Nos. 501-504 and transferred to the finished goods inventory account as products W, X, Y, and Z, respectively. (i) Sold products W, X, Y, and Z for 17,500, 18,000, 16,900, and 19,000, respectively. REQUIRED 1. Prepare general journal entries to record transactions (a) through (i). Make compound entries for (b), (d), and (g), with separate debits for each job. 2. Post the entries to the work in process and finished goods T accounts only.arrow_forward
- Entries and schedules for unfinished jobs and completed jobs Hildreth Company uses a job order cost system. The following data summarize the operations related to production for April, the first month of operations: A. Materials purchased on account, 147,000. B. Materials requisitioned and factory labor used: C. Factory overhead costs incurred on account, 6,000. D. Depreciation of machinery and equipment, 4,100. E. The factory overhead rate is 40 per machine hour. Machine hours used: F. Jobs completed: 101, 102, 103, and 105. G. Jobs were shipped and customers were billed as follows: Job 101, 62,900; Job 102, 80,700; Job 105, 45,500. Instructions 1. Journalize the entries to record the summarized operations. 2. Post the appropriate entries to T accounts for Work in Process and Finished Goods, using the identifying letters as transaction codes. Insert memo account balances as of the end of the month. 3. Prepare a schedule of unfinished jobs to support the balance in the work in process account. 4. Prepare a schedule of completed jobs on hand to support the balance in the finished goods account.arrow_forwardEntries and schedules for unfinished jobs and completed jobs Kurtz Fencing Inc. uses a job order cost system. The following data summarize the operations related to production for March, the first month of operations: A. Materials purchased on account, 45,000. B. Materials requisitioned and factory labor used: C. Factory overhead costs incurred on account, 1,800. D. Depreciation of machinery and equipment, 2,500. E. The factory overhead rate is 30 per machine hour. Machine hours used: F. Jobs completed: 301, 302, 303, and 305. G. Jobs were shipped and customers were billed as follows: Job 301, 8,500; Job 302, 16,150; Job 303, 13,400. Instructions 1. Journalize the entries to record the summarized operations. 2. Post the appropriate entries to T accounts for Work in Process and Finished Goods, using the identifying letters as transaction codes. Insert memo account balances as of the end of the month. 3. Prepare a schedule of unfinished jobs to support the balance in the work in process account. 4. Prepare a schedule of completed jobs on hand to support the balance in the finished goods account.arrow_forwardDuring 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: A. Record the expenses incurred. B. Record the allocation of overhead at the predetermined rate of $1.50 per machine hour.arrow_forward
- Lorrimer Company has a job-order cost system. The following debits (credits) appeared in the Work-in-Process account for the month of June. During the month of June, direct labor totaled 30,000 and 24,000 of overhead was applied to production. Finished Goods was debited 100,000 during June. Lorrimer Company applies overhead at a predetermined rate of 80% of direct labor cost. Job number 83, the only job still in process at the end of June, has been charged with manufacturing overhead of 3,400. What was the amount of direct materials charged to Job number 83? a. 3,400 b. 4,250 c. 8,350 d. 7,580arrow_forwardA company has the following transactions during the week. Purchase of $1,000 raw materials inventory Assignment of $500 of raw materials inventory to Job 5 Payroll for 20 hours with $1,000 assigned to Job 5 Factory utility bills of $750 Overhead applied at the rate of $10 per hour What is the cost assigned to Job 5 at the end of the week?arrow_forwardTerrills Transmissions uses a job order cost system. A partial list of the accounts being maintained by the company, with their balances as of November 1, follows: The following transactions were completed during November: a. Materials purchases on account during the month, 74,000. b. Materials requisitioned during the month: 1. Direct materials, 57,000. 2. Indirect materials, 11,000. c. Direct materials returned by factory to storeroom during the month, 1,100. d. Materials returned to vendors during the month prior to payment, 2,500. e. Payments to vendors during the month, 68,500. Required: 1. Prepare general journal entries for each of the transactions. 2. Post the general journal entries to T-accounts. 3. Balance the accounts and report the balances of November 30 for the following: a. Cash b. Materials c. Accounts Payablearrow_forward
- A 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?arrow_forwardOverhead Assignment: Actual and Normal Activity Compared Reynolds Printing Company specializes in wedding announcements. Reynolds uses an actual job-order costing system. An actual overhead rate is calculated at the end of each month using actual direct labor hours and overhead for the month. Once the actual cost of a job is determined, the customer is billed at actual cost plus 50%. During April, Mrs. Lucky, a good friend of owner Jane Reynolds, ordered three sets of wedding announcements to be delivered May 10, June 10, and July 10, respectively. Reynolds scheduled production for each order on May 7, June 7, and July 7, respectively. The orders were assigned job numbers 115, 116, and 117, respectively. Reynolds assured Mrs. Lucky that she would attend each of her daughters weddings. Out of sympathy and friendship, she also offered a lower price. Instead of cost plus 50%, she gave her a special price of cost plus 25%. Additionally, she agreed to wait until the final wedding to bill for the three jobs. On August 15, Reynolds asked her accountant to bring her the completed job-order cost sheets for Jobs 115, 116, and 117. She also gave instructions to lower the price as had been agreed upon. The cost sheets revealed the following information: Reynolds could not understand why the overhead costs assigned to Jobs 116 and 117 were so much higher than those for Job 115. She asked for an overhead cost summary sheet for the months of May, June, and July, which showed that actual overhead costs were 20,000 each month. She also discovered that direct labor hours worked on all jobs were 500 hours in May and 250 hours each in June and July. Required: 1. How do you think Mrs. Lucky will feel when she receives the bill for the three sets of wedding announcements? 2. Explain how the overhead costs were assigned to each job. 3. Assume that Reynoldss average activity is 500 hours per month and that the company usually experiences overhead costs of 240,000 each year. Can you recommend a better way to assign overhead costs to jobs? Recompute the cost of each job and its price, given your method of overhead cost assignment. Which method do you think is best? Why?arrow_forwardSource Documents For each of the following independent situations, give the source document that would be referred to for the necessary information. Required: 1. Direct materials costing 460 are requisitioned for use on a job. 2. Greiners Garage uses a job-order costing system. Overhead is applied to jobs based on direct labor hours. Which source document gives the number of direct labor hours worked on Job 2004-276? 3. Pasilla Investigative Services bills clients on a monthly basis for costs to date. Job 3-48 involved an investigator following the clients business partner for a week by automobile. Mileage is billed at number of miles times 0.75. 4. The foreman on the Jackson job wonders what the actual direct materials cost was for that job.arrow_forward
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