Chapter 15: Quick Study

QS 15-1: Distinguishing Jobs and Job Lots 1. Job Lot: 200 hats with company logo, 80 Little League trophies, 50 advertisements for stores. 2. Job: Unique handcrafted table, 90-foot custom yacht, custom-designed home. QS 15-2: Comparing Process and Job Order Operations 1. Job Order: Diverse products and services, low production volume, low product standardization. 2. Process: Routine, repetitive procedures; low product flexibility. QS 15-3: Recording Job Completion and Sale 1. Record Completion: o Debit Finished Goods Inventory: $10,500 o Credit Work in Process Inventory: $10,500 2. Record Sale: o Debit Cash: $14,900 o Credit Sales: $14,900 o Debit Cost of Goods Sold: $10,500 o Credit Finished Goods Inventory: $10,500 QS 15-4: Computing Total Cost and Cost Per Unit 1. Total Manufacturing Cost = $600 (direct materials) + $200 (direct labor) + $900 (overhead) = $1,700 2. Cost per Skateboard = $1,700 / 100 = $17 QS 15-5: Job Cost Sheet 1. Total Cost of Job Lot: Sum direct materials, direct labor, and overhead costs provided. 2. Cost Per Unit: Divide total job lot cost by 2,500 units. QS 15-6: Recording Materials 1. Purchase of Raw Materials: o Debit Raw Materials Inventory: $50,000 o Credit Cash: $50,000 2. Indirect Materials Used: o Debit Factory Overhead: $12,000 o Credit Raw Materials Inventory: $12,000 3. Direct Materials Used: o Debit Work in Process Inventory: $32,000 o Credit Raw Materials Inventory: $32,000 QS 15-7: Recording Labor 1. Direct Labor: o Debit Work in Process Inventory: $150,000 o Credit Factory Wages Payable: $150,000 2. Indirect Labor: o Debit Factory Overhead: $30,000 o Credit Factory Wages Payable: $30,000 QS 15-8: Computing Predetermined Overhead Rates 1. Rate Based on Direct Labor = $117,000 / $468,000 = 25% 2. Rate Based on Direct Materials = $117,000 / $390,000 = 30% QS 15-9: Applying Overhead 1. Overhead Rate = $560,000 / 1,400 machine hours = $400 per machine hour 2. Overhead Applied to Job 65A = 13 machine hours × $400 = $5,200 QS 15-10: Computing Predetermined Overhead Rate 1. Predetermined Overhead Rate = $1,170,000 / $900,000 = 130% of direct materials costs QS 15-11: Applying Overhead 1. Multiply direct materials costs for each dress by 40% to get overhead applied. QS 15-12: Computing Overhead Rate and Application 1. Predetermined Overhead Rate = $600,000 / 20,000 hours = $30 per direct labor hour 2. Overhead for Job A2 = 50 hours × $30 = $1,500 QS 15-13: Recording Actual Overhead Costs 1. Indirect Materials: o Debit Factory Overhead: $6,200 o Credit Raw Materials Inventory: $6,200 2. Indirect Labor: o Debit Factory Overhead: $9,000 o Credit Factory Wages Payable: $9,000 3. Other Overhead Costs: o Debit Factory Overhead: $13,300 (sum of remaining expenses) o o o Credit Accumulated Depreciation: $12,000 Credit Utilities Payable: $800 Credit Prepaid Insurance: $500 QS 15-14: Recording Job Completion and Sale 1. Completion of Jobs: o Debit Finished Goods Inventory: $27,000 (12,000 + 15,000) o Credit Work in Process Inventory: $27,000 2. Sale of Job 103: o Debit Accounts Receivable: $20,000 o Credit Sales: $20,000 o Debit Cost of Goods Sold: $12,000 o Credit Finished Goods Inventory: $12,000 QS 15-15: Computing Overhead Cost Flows 1. Total Applied Overhead: Sum credits in Factory Overhead account. 2. Total Actual Overhead: Sum debits in Factory Overhead account. 3. Under/Overapplied Overhead: Difference between applied and actual overhead. QS 15-16: Preparing Job Cost Sheet 1. Fill out job cost sheets for each job using provided data. 2. Total Work in Process Inventory for incomplete jobs. 3. Total Finished Goods Inventory for completed jobs not sold. QS 15-17: Schedule of Cost of Goods Manufactured 1. Cost of Goods Manufactured = direct materials + direct labor + applied overhead for completed jobs. QS 15-18 to QS 15-21: Recording Over/Underapplied Overhead 1. Compute Over/Underapplied Overhead: o If Factory Overhead debits exceed credits, it’s underapplied; if credits exceed debits, it’s overapplied. 2. Journal Entry to Close: o Underapplied: Debit Cost of Goods Sold; Credit Factory Overhead. o Overapplied: Debit Factory Overhead; Credit Cost of Goods Sold. QS 15-22 and QS 15-23: Job Order Costing for Services 1. Total Estimated Cost: o Calculate direct labor + applied overhead. 2. Quote with Markup: o Multiply total cost by 120% or 110% as per markup percentage given. QS 15-24: Gross Profit Ratio 1. Gross Profit Ratio = (Sales - Cost of Goods Sold) / Sales = ($80,000 $60,000) / $80,000 = 25% 2. Comparison: 25% is favorable compared to the 10% industry average.