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Job-Order Costing Entries - Cost Accounting

  1. When a manufacturing company uses direct materials for a specific job, what is the net effect of the corresponding journal entry on the company's total assets?
    Answer: Total assets remain unchanged. The journal entry to record the use of direct materials is a debit to Work-in-Process Inventory and a credit to Raw Materials Inventory. Both of these accounts are asset accounts. The entry simply reclassifies the cost from one asset account (Raw Materials) to another asset account (Work-in-Process). Therefore, there is no change in the total assets of the company.
  2. Based on the information provided, what is the correct journal entry to record the cost of goods sold for October?
    Answer: Debit Cost of Goods Sold $67,000; Credit Finished Goods $67,000 Only Job 88 was sold in October, so only its cost ($67,000) becomes Cost of Goods Sold. The entry transfers the cost from Finished Goods (where completed jobs are held) to Cost of Goods Sold. Choice A incorrectly credits Work in Process instead of Finished Goods. Choice C includes Jobs 91 and 93 which were completed but not yet sold. Choice D confuses the cost ($67,000) with the selling price ($95,000) and improperly combines the COGS and sales revenue entries.
  3. Northland Machining discovered that $3,200 of materials originally charged to Job 234 were actually used on Job 237. Additionally, a timekeeper error resulted in $1,850 of direct labor being incorrectly charged to Job 240 instead of Job 234. What journal entry is needed to correct both errors?
    Answer: Debit Work in Process—Job 237 $3,200; Debit Work in Process—Job 234 $1,850; Credit Work in Process—Job 234 $3,200; Credit Work in Process—Job 240 $1,850 When you encounter job costing correction entries, think systematically about what needs to be reversed and what needs to be recorded correctly. Each error requires two parts: undoing the wrong entry and making the right entry. Let's trace through both errors step by step. For the materials error, $3,200 was incorrectly charged to Job 234 when it should have been charged to Job 237. This means you need to reduce Job 234's Work in Process (credit $3,200) and increase Job 237's Work in Process (debit $3,200). For the labor error, $1,850 was incorrectly charged to Job 240 when it should have been charged to Job 234. This requires reducing Job 240's Work in Process (credit $1,850) and increasing Job 234's Work in Process (debit $1,850). The complete correcting entry debits Work in Process—Job 237 $3,200 and Work in Process—Job 234 $1,850, while crediting Work in Process—Job 234 $3,200 and Work in Process—Job 240 $1,850. This is answer C. Answer A incorrectly nets the effects on Job 234, showing only one debit instead of separate debit and credit entries. Answer B reverses the debit and credit for the materials correction, which would worsen the error. Answer D incorrectly removes costs from the jobs entirely by debiting inventory and expense accounts rather than transferring between jobs. Remember: job costing corrections transfer costs between Work in Process accounts—they don't remove costs from the production process entirely. Always trace each error separately, then combine the journal entries.
  4. Blackwood Inc. applies overhead based on machine hours. For the current year, estimated total overhead was $500,000 and estimated machine hours were 20,000. During June, Job 801 used 500 machine hours. Actual overhead costs for June were $40,000. The journal entry to apply overhead to Job 801 would include:
    Answer: A credit to Manufacturing Overhead for $12,500. First, calculate the predetermined overhead rate (POHR): POHR = Estimated Total Overhead / Estimated Allocation Base = $500,000 / 20,000 machine hours = $25 per machine hour. Next, calculate the overhead applied to Job 801: Applied Overhead = POHR Actual Machine Hours for Job = $25/hour 500 hours = $12,500. The journal entry to apply overhead is a debit to Work-in-Process and a credit to Manufacturing Overhead. Therefore, the entry includes a credit to Manufacturing Overhead for $12,500.
  5. Omega Systems applied $250,000 of manufacturing overhead during the year. At year-end, the Manufacturing Overhead account had a $15,000 credit balance before closing. What was the total amount of actual manufacturing overhead costs incurred during the year?
    Answer: $235,000 The balance in the Manufacturing Overhead account is the difference between actual overhead (debits) and applied overhead (credits). A credit balance means overhead was overapplied, so Applied MOH > Actual MOH. The formula is: Actual MOH - Applied MOH = Debit/(Credit) Balance. Let X be Actual MOH. Then, X - $250,000 = ($15,000). Solving for X gives: X = $250,000 - $15,000 = $235,000. So, the actual manufacturing overhead costs incurred were $235,000.
  6. Pacific Electronics uses predetermined overhead rates by department. In Assembly, overhead is applied at $12 per direct labor hour, while in Testing, overhead is applied at 200% of direct labor cost. Job 445 required 120 direct labor hours at $18 per hour in Assembly and 40 direct labor hours at $25 per hour in Testing. What is the total manufacturing overhead applied to Job 445?
    Answer: $3,440 Assembly overhead: 120 hours × $12/hour = $1,440. Testing overhead: (40 hours × $25/hour) × 200% = $1,000 × 200% = $2,000. Total applied overhead = $1,440 + $2,000 = $3,440. Choice A incorrectly applies 200% to hours instead of labor cost in Testing: $1,440 + (40 × 200% × $12.50) = $2,440. Choice C applies the wrong rate to Testing: $1,440 + (40 × $72) = $4,320. Choice D adds total labor costs to overhead: $3,440 + $3,320 = $6,760.
  7. Precision Manufacturing uses a job-order costing system. During March, the company requisitioned $45,000 of raw materials for Job 127 and $8,000 of indirect materials for general factory use. Labor costs for the month included $32,000 of direct labor for Job 127 and $15,000 of indirect labor. Manufacturing overhead is applied at 150% of direct labor cost. What is the correct journal entry to record the application of manufacturing overhead to Job 127?
    Answer: Debit Work in Process $48,000; Credit Manufacturing Overhead Applied $48,000 Manufacturing overhead is applied based on direct labor cost only. Direct labor for Job 127 was $32,000, so applied overhead = $32,000 × 150% = $48,000. The entry debits Work in Process and credits Manufacturing Overhead Applied. Choice B incorrectly includes indirect labor ($15,000) in the base: ($32,000 + $15,000) × 150% = $70,500. Choice C reverses the debit and credit. Choice D uses the wrong overhead amount and credits the wrong account.
  8. Riverside Manufacturing's payroll for the week included: direct labor for Job 156 ($8,400), direct labor for Job 157 ($6,200), indirect labor ($3,800), factory supervision ($2,100), and administrative salaries ($4,500). All amounts are gross pay before payroll taxes. If the company records payroll taxes as 25% of gross wages, what amount should be debited to Manufacturing Overhead Control for this payroll transaction?
    Answer: $7,375 Manufacturing Overhead Control includes indirect labor ($3,800), factory supervision ($2,100), and the payroll taxes on these manufacturing costs. Manufacturing gross pay subject to overhead treatment: $3,800 + $2,100 = $5,900. Payroll taxes on this amount: $5,900 × 25% = $1,475. Total debited to Manufacturing Overhead Control: $5,900 + $1,475 = $7,375. Choice A includes only the gross indirect costs without payroll taxes. Choice B incorrectly includes administrative salaries. Choice D includes payroll taxes on all wages including administrative.
  9. During January, Sterling Manufacturing incurred $85,000 in actual manufacturing overhead costs. During the same period, the company applied $80,000 of overhead to jobs in process. The journal entry to close the immaterial overhead balance to Cost of Goods Sold would include:
    Answer: A debit to Cost of Goods Sold for $5,000. First, determine if overhead is under- or overapplied. Actual MOH ($85,000) is greater than Applied MOH ($80,000), resulting in $5,000 of underapplied overhead. The Manufacturing Overhead account has a $5,000 debit balance. To close this account, Manufacturing Overhead must be credited for $5,000. To complete the entry, Cost of Goods Sold is debited for $5,000, which increases the Cost of Goods Sold for the period.
  10. Desert Manufacturing requisitioned $28,000 of raw materials during March: $22,000 for direct use on jobs and $6,000 for indirect factory use. The company's raw materials inventory had a beginning balance of $45,000, and raw materials purchases during March totaled $31,000. What is the correct journal entry to record the materials requisition, and what is the ending Raw Materials Inventory balance?
    Answer: Debit Work in Process $22,000, Debit Manufacturing Overhead Control $6,000, Credit Raw Materials Inventory $28,000; Ending balance $48,000 When you encounter materials requisition problems, you're dealing with the flow of raw materials from inventory into production. This requires understanding how direct and indirect materials move through different accounts in a job costing system. The correct journal entry debits Work in Process $22,000 (for direct materials that become part of specific jobs) and debits Manufacturing Overhead Control $6,000 (for indirect materials like supplies that support production but aren't traced to specific jobs). The credit to Raw Materials Inventory is $28,000 total, representing materials leaving inventory. For the ending inventory balance: Beginning balance ($45,000) + Purchases ($31,000) - Requisitions ($28,000) = $48,000. Choice A incorrectly debits Raw Materials Inventory instead of crediting it—materials requisitions reduce inventory, they don't increase it. The ending balance of $76,000 also ignores the requisitions entirely. Choice B treats all materials as direct materials by debiting Work in Process for the full $28,000, ignoring the fact that $6,000 was for indirect use. However, it does calculate the correct ending inventory balance of $48,000 (though this appears as $17,000 due to a calculation error in the problem setup). Choice C has the correct journal entry structure but shows an ending balance of $17,000, which incorrectly suggests that requisitions ($28,000) somehow exceeded the available materials after purchases. Remember: Direct materials flow to Work in Process, indirect materials flow to Manufacturing Overhead Control, and both reduce Raw Materials Inventory. Always trace the physical flow of materials to determine the proper accounts.
  11. Mountain Fabricators requisitioned materials for three jobs: Job 201 received $18,000 of aluminum sheets and $2,500 of specialty bolts; Job 202 received $25,000 of steel plates; Job 203 received $12,000 of copper wire. Additionally, $4,200 of general shop supplies and $1,800 of machine lubricants were requisitioned for factory-wide use. What is the total amount that should be debited to Work in Process for this materials requisition?
    Answer: $57,500 Only direct materials are debited to Work in Process. Job 201: $18,000 + $2,500 = $20,500; Job 202: $25,000; Job 203: $12,000. Total direct materials = $57,500. The shop supplies ($4,200) and machine lubricants ($1,800) are indirect materials debited to Manufacturing Overhead Control, not Work in Process. Choice A omits the specialty bolts for Job 201. Choice C includes the shop supplies. Choice D includes both indirect materials.
  12. At the end of its fiscal year, Meridian Industries had a $15,000 credit balance in its Manufacturing Overhead account. The company's controller has determined this amount is immaterial. The correct journal entry to close the Manufacturing Overhead account will result in:
    Answer: A $15,000 decrease to Cost of Goods Sold. A credit balance in the Manufacturing Overhead account indicates that overhead was overapplied (more overhead was applied to jobs than was actually incurred). To close this account, a debit is made to Manufacturing Overhead for $15,000. When the amount is immaterial, the corresponding credit is made to Cost of Goods Sold. A credit to Cost of Goods Sold decreases its balance, which in turn increases gross profit and net income.
  13. During production of Job C14, materials costing $500 were found to be defective due to an internal failure. This spoilage is considered normal and the spoiled goods have no disposal value. The journal entry to account for this normal spoilage would be:
    Answer: Debit Manufacturing Overhead $500; Credit Work-in-Process $500. The cost of normal spoilage is considered an inherent cost of production and is therefore treated as a manufacturing overhead cost. The cost of the spoiled goods ($500) that has already been charged to the Work-in-Process account for Job C14 must be removed. This is accomplished by crediting Work-in-Process. The cost is then transferred to Manufacturing Overhead by debiting that account. If the spoilage were abnormal, it would be charged to a loss account.
  14. A journal entry includes a debit to Work-in-Process for $32,000 and a credit to Manufacturing Overhead for $32,000. The company's predetermined overhead rate is $16 per machine hour. What does this journal entry represent?
    Answer: The application of overhead to production based on 2,000 machine hours. A debit to Work-in-Process and a credit to Manufacturing Overhead is the standard journal entry for applying overhead to jobs. The amount of overhead applied is calculated by multiplying the predetermined rate by the actual amount of the allocation base used. In this case, $32,000 (Applied MOH) / $16 per machine hour (POHR) = 2,000 machine hours. Therefore, the entry represents the application of overhead based on the usage of 2,000 machine hours.
  15. Job 12 produced 1,000 identical units at a total cost of $8,500. The company sold 600 of these units on account. The journal entry to record the cost of goods sold for this transaction would include a:
    Answer: Debit to Cost of Goods Sold for $5,100. First, calculate the cost per unit: Total Cost / Total Units = $8,500 / 1,000 units = $8.50 per unit. Next, calculate the cost of the units sold: Cost per Unit Units Sold = $8.50 600 units = $5,100. The journal entry to record the cost of the sale is a debit to Cost of Goods Sold and a credit to Finished Goods Inventory. Therefore, the entry includes a debit to Cost of Goods Sold for $5,100.
  16. At the end of a period, a company has three jobs with the following statuses and costs: * Job 1: Completed and sold, total cost $22,000 * Job 2: Completed, not sold, total cost $15,000 * Job 3: In process, costs to date $8,000 Based on this information, which journal entry must have been made during the period?
    Answer: A debit to Finished Goods for $37,000. The journal entry to transfer completed jobs from production to the warehouse is a debit to Finished Goods and a credit to Work-in-Process. During this period, both Job 1 and Job 2 were completed. Therefore, their total costs must have been transferred out of WIP and into Finished Goods. The total cost of completed jobs is $22,000 (Job 1) + $15,000 (Job 2) = $37,000. The correct entry is Debit Finished Goods $37,000; Credit Work-in-Process $37,000. Option A reflects the debit portion of this entry.
  17. Coastal Industries completed Job 89 in April with total costs of $125,000. The job was immediately transferred to finished goods inventory. Later in April, the entire job was sold on account for $185,000. Which sequence of journal entries correctly records both the transfer to finished goods and the subsequent sale?
    Answer: Debit Finished Goods $125,000, Credit Work in Process $125,000; then Debit Cost of Goods Sold $125,000, Credit Finished Goods $125,000; then Debit Accounts Receivable $185,000, Credit Sales Revenue $185,000 Three separate journal entries are required: (1) Transfer completed job from WIP to Finished Goods at cost, (2) Record COGS when sold by transferring from Finished Goods to COGS at cost, and (3) Record the sale at selling price. Choice B incorrectly records gross profit as a direct credit and transfers at selling price rather than cost. Choice C skips the Finished Goods step entirely. Choice D incorrectly treats the markup as a gain rather than normal sales revenue.
  18. Falcon Industries incurred the following factory costs during April: indirect materials used $12,000; factory supervisor's salary $8,000; depreciation on factory building $15,000; and direct labor $50,000. What is the total debit to the Manufacturing Overhead account from these specific transactions?
    Answer: $35,000 The Manufacturing Overhead account is debited for all actual indirect manufacturing costs incurred. From the list provided, the indirect costs are: indirect materials ($12,000), factory supervisor's salary ($8,000), and depreciation on the factory building ($15,000). Direct labor ($50,000) is a direct cost and is debited to the Work-in-Process account, not Manufacturing Overhead. The total debit to Manufacturing Overhead is $12,000 + $8,000 + $15,000 = $35,000.
  19. Atlantic Woodworks applies overhead using a predetermined rate of $8.50 per machine hour. Job 412 used 340 machine hours and was completed with total costs of $18,650. When the job was transferred to finished goods, the company discovered that overhead had been applied using an incorrect rate of $7.25 per machine hour. What adjusting entry is required to correct the overhead application before transferring the job?
    Answer: Debit Work in Process $425; Credit Manufacturing Overhead Applied $425 Correct overhead application: 340 hours × $8.50 = $2,890. Actual overhead applied: 340 hours × $7.25 = $2,465. Additional overhead needed: $2,890 - $2,465 = $425. The entry debits Work in Process to increase the job cost and credits Manufacturing Overhead Applied to record the additional application. Choice B reverses the entry, reducing overhead instead of increasing it. Choice C uses the incorrect full amount ($2,890 - $1,425) as if no overhead was previously applied. Choice D credits the wrong overhead account.
  20. Vanguard Fabricators completed Job #775, which had a total manufacturing cost of $42,000. The job was sold on account to a customer for $65,000. Which journal entry correctly records the cost portion of this sale?
    Answer: Debit Cost of Goods Sold $42,000; Credit Finished Goods Inventory $42,000. The sale of a finished product requires two journal entries: one to record the revenue and receivable, and another to record the cost of the sale. The question specifically asks for the entry related to the cost. This entry transfers the cost of the item from the balance sheet (Finished Goods Inventory) to the income statement (Cost of Goods Sold). The correct entry is a debit to Cost of Goods Sold and a credit to Finished Goods Inventory for the manufacturing cost of the job, which is $42,000.

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