8. Sanderson Company manufactures custom-built conveyor systems for factory and commercial operations.
Erin Smith is the cost accountant for Sanderson and she is in the process of educating a new employee,
Heather Fontenot about the job order costing system that Sanderson uses. (The system is based on normal
costs; overhead is applied based on direct labor cost and rounded to the next whole dollar.) Lisa gathers
the following job order cost records for July:
Direct Direct Total
Job No. Materials Labor Applied OH Cost
667 $ 5,901 $1,730 $ 1,990 $ 9,621
669 18,312 1,810 2,082 22,204
670 406 500 575 1,481
671 51,405 9,500 10,925 71,830
672 9,615 550 633 10,798
To explain the missing job number, Erin informed Heather that Job #668 had been completed in June. She
also told her that Job #667 was the only job in process at the beginning of July. At that time, the job had
been assigned $4,300 for direct material and $900 for direct labor. At the end of July, Job #671 had not
been completed; all others had. Erin asked Heather several questions to determine whether she understood
the job order system.
Required: Help Heather answer the following questions:
a. What is the predetermined overhead rate used by ABC Company?
b. What was the total cost of beginning Work in Process inventory?
c. What was total prime cost incurred for the month of July?
d. What was cost of goods manufactured for July?
ANS:
a. Use any job started in July:
Rate = MOH JOB $670 $575 = 115%/DL Cost
DL COST $500
b. DM $4,300
DL 900
FOH 1,035 ($900 115%)
$6,235
c. Prime Cost =DM + DL
DM = $85,639 - 4,300 = $81,339
DL = 14,090 - 900 = 13,190
$94,529
d. COGM = $9,621 + 22,204 + 1,481 + 10,798 = $44,104
10. You are asked to bring the following incomplete accounts of Andrepont Printing, Inc. up to date through
January 31,20X5. Consider the data that appear in the T-accounts as well as additional information given
in items (a) through (i).
Andrepont’s job order costing system has two direct cost categories (direct material and direct
manufacturing labor) and one indirect cost pool (manufacturing overhead, which is allocated using direct
manufacturing labor costs).
Materials Inventory Control Wages Payable Control
12/31/20X4 1/31/20X5
Balance 15,000 Balance 3,000
Manufacturing Department
Work in Process Inventory Control Overhead Control
January 20X5
Charges 57,000
Manufacturing Overhead Control
Finished Goods Inventory Control Cost of Goods Sold
12/31/20X4
Balance 20,000
Additional Information:
a. Manufacturing department overhead is allocated using a budgeted rate set every
December. Management forecasts next year's overhead and next year's direct
manufacturing labor costs. The budget for 20X5 is $400,000 of direct manufacturing
labor and $600,000 of manufacturing overhead.
b. The only job unfinished on January 31, 20X5 is No. 419, on which direct
manufacturing labor costs are $2,000 (125 direct manufacturing labor hours) and
direct material costs are $8,000.
c. Total material placed into production during January is $90,000.
d. Cost of goods completed during January is $180,000.
e. Material inventory as of January 31, 20X5 is $20,000.
f. Finished goods inventory as of January 31, 20X5 is $15,000.
g. All plant workers earn the same wage rate. Direct manufacturing labor hours for
January totals 2,500. Other labor and supervision totals $10,000.
h. The gross plant payroll on January paydays totals $52,000. Ignore withholdings. All
personnel are paid on a weekly basis.
i. All "actual" manufacturing department overhead incurred during January has already
been posted.
Required:
a. Material purchased during January
b. Cost of Goods Sold during January
c. Direct Manufacturing Labor Costs incurred during January
d. Manufacturing Overhead Allocated during January
e. Balance, Wages Payable Control, December 31, 20X4
f. Balance, Work in Process Inventory Control, January 31, 20X5
g. Balance, Work in Process Inventory Control, December 31, 20X4
h. Balance, Finished Goods Inventory Control, January 31, 20X5
i. Manufacturing Overhead underapplied or overapplied for January
ANS:
a. $15,000 + Purchases - $20,000 = $90,000. Purchases = $95,000
b. $20,000 + $180,000 - $15,000 = $185,000
c. DL = $2,000 = $16/HR 2,500 HRS = $40,000
125
d. $600,000 = 150% DL cost $40,000 = $60,000
$400,000
e. BEGIN + $50,000 - $52,000 = $3,000 BEGIN = $5,000
f. $2,000 + ($2,000 150%) + $8,000 = $13,000
g. BEGIN + $90,000 + $40,000 + $60,000 - $180,000 = $13,000 BEGIN = $3,000
h. $20,000 + $180,000 - $185,000 = END = $15,000
i. APPLIED $60,000
ACTUAL 57,000
$ 3,000 overapplied
