Chapter 4
Job Costing
Exercise 4.1
Madison Company has over-allocated manufacturing overhead (MOH) of $45,000
for the year ended December 31, 2005. Before disposing of the overallocated
MOH, selected year-end balances from Madison's general ledger are as follows:
MOH Control $435,000
MOH Allocated 480,000
Work-in-Process Control 24,000
Finished Goods Control 56,000
Cost of Goods Sold 720,000
At year-end, the company prorates under-allocated or over-allocated MOH to
the last three accounts listed above based on their ending balances (before proration).
a. Compute the amount of over-allocated MOH to be prorated to each of the three
accounts and compute their balances after proration.
b. Prepare a journal entry to record the proration
Solution 4.1
Part (a)
Account balance Proration of US$ 45,000 Account
(before proration) over-allocated MOH balance (after
proration)
(1) (2) (3) = (1) –(2)
US$ US$
WIP 24,000 3% 0.03 X $ 45,000 = $ 1,350 22,650
FG 56,000 7% 0.07 X $ 45,000 = $ 3,150 52,850
COGS 720,000 90% 0.90 X $ 45,000 = $ 40,500 679,500
800,000 100% $ 45,000 755,000
The prorated amounts of overallocated MOH are deducted from the account
balances before proration because too much MOH was allocated to the accounts
during the year.
Part (b) - The journal entry to record this proration is:
Dr Cr
MOH Allocated 480,000
Work-in-Process Control 1,350
Finished Goods 3,150
Cost of Goods Sold 40,500
MOH Control 435,000
Cost Accounting – a Managerial Emphasis Page 1
Haigazian University
Chapter 4
Job Costing
Exercise 4.2
Rigdon Company uses a job-costing system. The following accounts are from
Rigdon's general ledger:
AP : Accounts Payable Control
AD : Accumulated Depreciation Control
C : Cash Control
COGS : Costs of Goods Sold
FG : Finished Goods Control
MOHA : Manufacturing Overhead Allocated
MOHC : Manufacturing Overhead Control
M : Materials Control
WP : Wages Payable Control
WIP : Work in process Control
Enter the identifying letters in the debit and credit columns to record each transaction.
Debit(s) Credit(s)
a) Indirect materials requisitioned
b) Depreciation on manufacturing equipment
c) Manufacturing overhead allocated to jobs
d) Direct manufacturing labor costs
e) Completion of jobs Dispose of an immaterial amount of
underallocated overhead
Solution 4.2
Dr Cr
a) MOHC M
b) MOHC AD
c) WIP MOHA
d) WIP WP
e) FG WIP
f) MOHA, COGS MOHC
Exercise 4.3
Worrell Corporation uses a job-costing system. The following debits (credits)
appeared in the general-ledger account Work-in-Process Control for March 2005:
March 1, balance $ 12,000
March 31, direct materials $ 40,000
March 31, direct manufacturing labor 30,000
March 31, manufacturing overhead allocated 27,000
March 31, transferred to finished goods (100,000)
Worrell allocates overhead to jobs at a budgeted rate of 90% of direct manufacturing
labor costs. Job 232 (that has zero opening balance in the WIP acc), the only job
still in process at the end of March 2005, has $2,250 of manufacturing overhead
allocated to it.
Compute the amount of direct materials debited to Job 232.
Cost Accounting – a Managerial Emphasis Page 2
Haigazian University
Chapter 4
Job Costing
Solution 4.3
Three steps are used to obtain the answer.
a) First, compute the March 31 balance of Work-in Process Control: $12,000 +
$40,000 + $30,000 + $27,000 - $100,000 = $9,000. This balance is also the
balance of Job 232 because it is the only unfinished job.
b) Second, compute the direct manufacturing labor (DML) debited to Job 232:
0.90 DML = $2,250
DML = $2,250 / 0.90 = $2,500
c) Third, compute the amount of direct materials debited to Job 232:
$9,000 - $2,250 - $2,500 = $4,250
Cost Accounting – a Managerial Emphasis Page 3
Haigazian University
Chapter 4
Job Costing
Exercise 4.6
Thunder bird uses a job order cost system and applies factory overhead to production
orders on the basis direct labor costs. The overhead rates for 2007 are 200% for
department A and 50% for department B. Job 123 started and completed during year
2008 was charged with the following costs:
Department Total
A B
Direct materials $ 25,000 $ 5,000 $30,000
Direct labor ? 30,000
Factory overhead 40,000 ?
Determine the total manufacturing costs assigned to Job 123
Solution 4.6
DL – dpt A - 200% = FOH / DL
200% = 40,000/DL
DL = 40,000/200% = 20,000
FOH – dpt B – 50% = FOH / DL
50% = FOH/ 30,000
FOH = 50% x 30,000= 15,000
Department Total
A B
Direct materials $ 25,000 $ 5,000 $30,000
Direct labor 20,000 30,000 50,000
Factory overhead 40,000 15,000 55,000
135,000
Solution 4.7
Helper Corporation
Statement of Cost of Goods Manufactured
Year ended 31 December 2007
Direct materials placed in production (DM used)
Direct manufacturing labor cost in 2007
Manufacturing overhead costs in 2007
Manufacturing costs incurred during the period 1,000,000
Add: beginning work in process 1/1/2007 0.8X
Deduct: ending work in process 31/12/2007 X
Cost of goods manufactured in 2007 970,000
1) 970,000 = 1,000,000 + 0.8X – x
X = 150,000
Cost Accounting – a Managerial Emphasis Page 4
Haigazian University
Chapter 4
Job Costing
Helper Corporation
Statement of Cost of Goods Manufactured
Year ended 31 December 2007
Direct materials placed in production (DM used) 370,000
Direct manufacturing labor cost in 2007 360,000
Manufacturing overhead costs in 2007 270,000
Manufacturing costs incurred during the period 1,000,000
Add: beginning work in process 1/1/2007 120,000
Deduct: ending work in process 31/12/2007 (50,000)
Cost of goods manufactured in 2007 970,000
2) FOH = 27 % X 1,000,000= 270,000
3) FOH = 75% X DL
270,000= 0.75 X DL
DL = 270,000/0.75 = 360,000
Cost Accounting – a Managerial Emphasis Page 5
Haigazian University
