Chapter 15: Problem Set B

Problem 15-1B: Computing Job Costs and Overhead Rate; Assigning Costs to Inventory 1. Total Cost of Direct Materials in May: o Add up all direct materials costs for Jobs 8, 9, and 10 in May. 2. Total Cost of Direct Labor in May: o Add up all direct labor costs for Jobs 8, 9, and 10 in May. 3. Predetermined Overhead Rate: o Use the overhead rate formula based on direct labor from April: Predetermined Overhead Rate=Applied Overhead in AprilDirect Labo r Cost in April 4. Total Cost Transferred to Finished Goods Inventory in May: o Combine the total costs of Jobs 8 and 9 (since they were finished in May). Problem 15-2B: Computing and Recording Job Costs; Preparing Schedule of Cost of Goods Manufactured 1. Overhead Applied to Each Job in September: o Apply overhead at 50% of direct labor costs for each job. 2. Total Cost Assigned to Each Job: o Add beginning balances (August 31) and current period costs (September) for direct materials, direct labor, and applied overhead for each job. 3. Journal Entries: o Record each September transaction, including materials purchases, use of direct and indirect materials, labor, overhead application, and actual overhead costs. 4. Schedule of Cost of Goods Manufactured: o Sum the manufacturing costs for completed jobs during September. 5. Gross Profit for September: o Subtract COGS (cost of Job 114) from the sales revenue for Job 114 to find gross profit. 6. Over/Underapplied Overhead Impact: o Since any over/underapplied overhead is closed to COGS, evaluate if this adjustment affects reported gross profit by overstating or understating the job’s actual cost. Problem 15-3B: Computing and Recording Job Costs; Preparing Income Statement and Balance Sheet 1. Journal Entries: Record direct materials, direct labor, overhead application, indirect materials, and indirect labor. Then, close any over/underapplied overhead to COGS. Factory Overhead T-account: o Post all overhead transactions to this account and calculate if overhead is overapplied or underapplied. Revised Account Balances: o Update account balances using a prior year’s retained earnings balance and record final inventory adjustments for December 31. Income Statement and Balance Sheet: o Include all revenues, COGS, and operating expenses on the income statement. List all assets (including inventory adjustments) on the balance sheet. Error Analysis: o If indirect materials were incorrectly classified, determine the impact on total assets, as the misclassification affects inventory valuation. o 2. 3. 4. 5. Problem 15-4B: Preparing Job Cost Sheets, Recording Costs, Preparing Inventory Ledger Accounts 1. Job Cost Sheets: o Complete sheets for each job using September’s costs, applying overhead at 200% of direct labor. 2. Journal Entries: o Record each event from materials purchases, labor, overhead application, and other actual overhead costs to finished goods transfers and sales. 3. T-Accounts Setup: o Post transactions to Raw Materials Inventory, Work in Process Inventory, Finished Goods Inventory, Factory Overhead, and Cost of Goods Sold T-accounts and compute ending balances. 4. Inventory and COGS Verification: o Verify that the total costs for jobs in Work in Process, Finished Goods, and COGS match the respective account balances. Problem 15-5B: Computing and Applying Overhead to Jobs; Recording Under- or Overapplied Overhead 1. Predetermined Overhead Rate: o Calculate as total estimated overhead divided by estimated direct labor costs: Predetermined Overhead Rate=Total Estimated Overhead Total Estimated Direct Labor Cost 2. Overhead Applied to Each Job: o Multiply each job’s direct labor cost by the predetermined overhead rate. 3. Over/Underapplied Overhead: o Compare the actual overhead incurred with applied overhead, recording any discrepancy as an adjusting entry to COGS. Problem 15-6B: Preparing Job Cost Sheets and Materials Ledger Cards; Computing Inventory 1. Job Cost Sheets: o Record direct materials, direct labor, and applied overhead (70% of direct labor) on the job cost sheets for Jobs 450 and 451. 2. Materials Ledger Cards: o Record beginning balances, purchases, and requisitions of steel, wood, and paint for each job. 3. Gross Profit Calculation: o For Job 450, calculate gross profit by subtracting the total cost from the sales price of $290,000. 4. Balance Sheet Inventory Balances: o Determine the final balances of Raw Materials and Work in Process Inventory as of the month-end.