Assigning Costs to Jobs - Cost Accounting

1. What amount should be reported as Work in Process inventory at September 30?
   Answer: $29,800 Work in Process includes only incomplete jobs, which is Job C-18 only. Job C-18 costs: Direct materials $11,800 + Direct labor $8,000 + Applied overhead ($8,000 × 125%) $10,000 = $29,800. Choice B ($19,800) represents only materials and labor without overhead. Choice C ($10,000) represents only the applied overhead. Choice D ($23,300) might result from calculation errors in overhead application or using wrong amounts.
2. What is the company's predetermined overhead rate per direct labor hour?
   Answer: $24.00 per DLH This problem requires working backward from the total job cost to find the applied overhead, and then calculating the rate. 1. Calculate Direct Labor Cost = 500 hours * $24/hour = $12,000. 2. Calculate Applied Overhead = Total Job Cost - Direct Materials - Direct Labor = $35,000 - $11,000 - $12,000 = $12,000. 3. Calculate Overhead Rate = Applied Overhead / Activity Base = $12,000 / 500 direct labor hours = $24.00 per direct labor hour. The fact that the OH rate is the same as the labor wage rate is a coincidence designed to be a distractor.
3. What is the total cost that should be assigned to Job #C-88 after accounting for the rework?
   Answer: $3,200 Rework costs are treated differently based on their cause. Rework due to an internal failure (the machine malfunction) is charged to Manufacturing Overhead for all jobs to bear, not the specific job. Rework due to a customer-initiated change is charged directly to that specific job. Therefore, the job's cost is the original cost plus the cost of the customer-requested rework. Total Job Cost = $3,000 (Original Cost) + $200 (Customer Rework) = $3,200.
4. What is the total manufacturing cost assigned to Job #B-52?
   Answer: $37,000 The total manufacturing cost of a job consists of its direct materials, direct labor, and applied manufacturing overhead. Indirect costs are part of actual overhead, not assigned directly to the job. 1. Direct Materials = $15,000. 2. Direct Labor = 400 hours * $25/hour = $10,000. 3. Applied Manufacturing Overhead = 120% of Direct Labor Cost = 1.20 * $10,000 = $12,000. 4. Total Job Cost = $15,000 (DM) + $10,000 (DL) + $12,000 (Applied OH) = $37,000.
5. What is the selling price for Job #P-34?
   Answer: $5,460 The selling price is calculated by first determining the total manufacturing cost and then applying the markup percentage. 1. Total Manufacturing Cost = Direct Materials + Direct Labor + Applied Overhead = $1,200 + $1,800 + $900 = $3,900. 2. Markup Amount = Total Manufacturing Cost Markup Percentage = $3,900 0.40 = $1,560. 3. Selling Price = Total Manufacturing Cost + Markup Amount = $3,900 + $1,560 = $5,460.
6. What is the total direct labor cost that should be assigned to Job #R-99?
   Answer: $950 When overtime is incurred due to the specific requirements of a particular job (e.g., a customer rush order), the overtime premium is charged to that job as direct labor. 1. Regular Pay = 40 hours * $20/hour = $800. 2. Overtime Pay = 5 hours * $30/hour = $150. 3. Total Direct Labor Cost = $800 + $150 = $950. Note that the overtime premium ($10/hr * 5 hrs = $50) is included in the job cost because the overtime was job-specific.
7. If these were the only two jobs worked on during October, what was the actual total manufacturing overhead incurred for the month?
   Answer: $8,430 The actual overhead costs given in the problem are already stated: Job X-15 incurred $3,570 in actual overhead, and Job Y-22 incurred $4,860 in actual overhead. Total actual overhead = $3,570 + $4,860 = $8,430. The applied overhead information and year-end overapplication are distractors - the question asks specifically for actual overhead incurred. Choice B ($8,610) might result from adding the applied overhead amounts. Choice C ($7,050) could result from subtracting the overapplication. Choice D ($9,240) might result from incorrectly calculating applied overhead (205 hours × $42 = $8,610) plus some error.
8. What was the amount of direct materials cost assigned to Job #215?
   Answer: $18,000 The problem requires solving for the direct materials cost using the total cost equation. 1. Total Cost = DM + DL + Applied OH. 2. Given: Total Cost = $48,000; DL = $12,000. 3. Calculate Applied OH = 150% of DL Cost = 1.50 * $12,000 = $18,000. 4. Rearrange the formula to solve for DM: DM = Total Cost - DL - Applied OH. 5. DM = $48,000 - $12,000 - $18,000 = $18,000.
9. What is the balance on the job cost sheet for Job #410 at the end of the month?
   Answer: $18,900 The ending balance of a job still in process is the sum of its beginning balance and all costs added during the period. 1. Beginning Balance = $8,500. 2. Direct Materials Added = $4,000. 3. Direct Labor Added = 200 hours * $22/hour = $4,400. 4. Overhead Applied = 200 direct labor-hours * $10/hour = $2,000. 5. Ending Balance = $8,500 + $4,000 + $4,400 + $2,000 = $18,900.
10. Which of the following journal entries correctly records the transfer of Job #12 from work in process to its next stage upon completion?
    Answer: Debit Finished Goods Inventory $5,000; Credit Work in Process Inventory $5,000. The question asks for the entry upon completion of the job, which signifies its transfer from the factory floor (Work in Process) to the warehouse (Finished Goods). The entry to record the sale happens subsequently. Therefore, the correct entry is a debit to Finished Goods Inventory and a credit to Work in Process Inventory for the total cost of the job.
11. What amount of manufacturing overhead was assigned to Job #M-03 during March?
    Answer: $2,400 Jobs are costed throughout the year using the predetermined overhead rate, which is based on estimated figures. The actual overhead and activity levels are used at year-end to reconcile the overhead account, not to re-cost individual jobs. 1. Calculate the Predetermined Overhead Rate = Estimated Total Overhead / Estimated Activity Base = $500,000 / 25,000 machine hours = $20 per machine hour. 2. Apply overhead to Job #M-03 = Rate Actual Activity for the Job = $20/MH 120 MH = $2,400.
12. What is the total amount of manufacturing overhead applied to Job #77?
    Answer: $1,600 Total manufacturing overhead is the sum of the overhead applied in each department, using each department's specific rate and activity base. 1. Overhead applied in Machining = 50 machine-hours * $20/machine-hour = $1,000. 2. Overhead applied in Assembly = 40 direct labor-hours * $15/direct labor-hour = $600. 3. Total Applied Overhead = $1,000 + $600 = $1,600.
13. What is the total direct material cost that should be assigned to Job #Y-01 from this purchase?
    Answer: $27,000 The cost of direct materials should include all costs required to get the materials into a condition and location ready for use. This includes the invoice price, freight-in, and any applicable taxes or duties. Based on the company's policy, all these costs are part of the direct material cost for the job. Total Direct Material Cost = Invoice Price + Freight-in + Import Duties = $25,000 + $1,500 + $500 = $27,000.
14. What was the amount of direct professional labor cost assigned to this engagement?
    Answer: $40,000 This problem requires using the definition of conversion cost and the overhead rate to solve for direct labor. 1. Conversion Cost = Direct Labor (DL) + Manufacturing Overhead (MOH). So, DL + MOH = $90,000. 2. We also know that MOH = 1.25 * DL. 3. Substitute the second equation into the first: DL + (1.25 * DL) = $90,000. 4. Simplify and solve for DL: 2.25 * DL = $90,000. 5. DL = $90,000 / 2.25 = $40,000.
15. What is the total manufacturing cost of Job #Alpha upon its completion?
    Answer: $5,200 The total cost is the sum of costs from Department 1 plus the additional costs incurred in Department 2. 1. Cost from Dept. 1: - DM: $2,000 - DL: $800 - OH: 1.50 * $800 = $1,200 - Total from Dept. 1 = $2,000 + $800 + $1,200 = $4,000. 2. Costs added in Dept. 2: - DL: $600 - OH: 20 machine hours * $30/hour = $600 - Total added in Dept. 2 = $600 + $600 = $1,200. 3. Total Job Cost = Cost from Dept. 1 (Transferred-in Cost) + Costs added in Dept. 2 = $4,000 + $1,200 = $5,200.
16. How should the labor cost for the 2 hours of total idle time (1.5 for outage, 0.5 for breaks) be allocated?
    Answer: $12 charged to Manufacturing Overhead; $36 charged as a separate period loss. Normal idle time (breaks) is an expected cost of production and is properly included in Manufacturing Overhead. Abnormal idle time (unexpected breakdowns, outages) is not a normal production cost and is treated as a period loss. Neither is charged directly to a specific job. 1. Normal Idle Time Cost = 0.5 hours * $24/hour = $12. This is charged to Manufacturing Overhead. 2. Abnormal Idle Time Cost = 1.5 hours * $24/hour = $36. This is charged to a period loss account (e.g., 'Loss from Power Outage').
17. By how much would the total cost assigned to Job #K-10 change if the company switches to the departmental overhead rates?
    Answer: $0, no change This question requires calculating the applied overhead under both methods and comparing them. The change in total cost will equal the change in applied overhead, as direct materials and direct labor are unaffected. 1. Overhead with Plantwide Rate: (10 DLH + 5 DLH) $40/DLH = 15 DLH $40/DLH = $600. 2. Overhead with Departmental Rates: - Dept A: 10 DLH * $25/DLH = $250 - Dept B: 5 DLH * $70/DLH = $350 - Total = $250 + $350 = $600. 3. Change = $600 (Departmental) - $600 (Plantwide) = $0. The cost assigned to this specific job does not change.
18. What is the total direct materials cost that should be recorded on the job cost sheet for Job #M-16?
    Answer: $6,200 Direct materials cost for a job includes only the materials that are directly traceable to that job and are actually used. Component parts are direct materials, while machine lubricants are indirect materials (part of overhead). The cost of direct materials returned to the storeroom must be subtracted from the amount initially requisitioned. Direct Materials Cost = Initial Requisition - Returns = $7,000 - $800 = $6,200.
19. What is the total cost assigned to the 'Downtown Tower' project?
    Answer: $112,000 In a service firm, total project cost includes direct professional labor, other direct costs, and applied overhead. 1. Total Direct Professional Labor Cost = $40,000 (Senior) + $25,000 (Junior) = $65,000. 2. Other Direct Costs = $8,000 (travel and blueprinting). 3. Applied Overhead = 60% of Direct Labor Cost = 0.60 × $65,000 = $39,000. 4. Total Project Cost = Direct Labor + Other Direct Costs + Applied Overhead = $65,000 + $8,000 + $39,000 = $112,000.
20. What is the total manufacturing cost of Job #F-08?
    Answer: $8,087.50 The total cost requires summing direct materials, total direct labor from both categories, and the applied overhead based on that total labor cost. 1. Direct Materials = $4,500. 2. Direct Labor (Welder) = 30 hours * $35/hour = $1,050. 3. Direct Labor (Fabricator) = 50 hours * $20/hour = $1,000. 4. Total Direct Labor Cost = $1,050 + $1,000 = $2,050. 5. Applied Overhead = 75% of Total Direct Labor = 0.75 * $2,050 = $1,537.50. 6. Total Job Cost = $4,500 + $2,050 + $1,537.50 = $8,087.50.

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