Exercise 3.

1
147. A number of companies in different industries are listed below:
Natural gas production company
Food caterer that supplies food for weddings and other special events
Elevator production and installation company
Coal mining company
Contract printer that produces posters, books, and pamphlets to order
Dairy farm

Required:

For each company, indicate whether the company is most likely to use job-order costing or
process costing.

148. Whether a company uses process costing or job-order costing depends on its industry. A
number of companies in different industries are listed below:

Brick manufacturer
Contract printer that produces posters, books, and pamphlets to order
Natural gas production company
Dairy farm
Coal mining company
Specialty coffee roaster (roasts small batches of specialty coffee beans)

Required:
For each company, indicate whether the company is most likely to use job-order costing or
process costing.
 Exercise 3.2

35. Job 607 was recently completed. The following data have been recorded on its job cost sheet:

The company applies manufacturing overhead on the basis of machine-hours. The predetermined
overhead rate is $14 per machine-hour. The total cost that would be recorded on the job cost
sheet for Job 607 would be:
A. $4,107
B. $6,319
C. $3,432
D. $4,863

36. The following data have been recorded for recently completed Job 501 on its job cost sheet.
Direct materials cost was $3,067. A total of 30 direct labor-hours and 104 machine-hours were
worked on the job. The direct labor wage rate is $12 per labor-hour. The company applies
manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $11
per machine-hour. The total cost for the job on its job cost sheet would be:
A. $4,571
B. $3,757
C. $3,090
D. $3,427

44. The Watts Company uses predetermined overhead rates to apply manufacturing overhead to
jobs. The predetermined overhead rate is based on labor cost in Dept. A and on machine-hours in
Dept. B. At the beginning of the year, the company made the following estimates:

What predetermined overhead rates would be used in Dept A and Dept B, respectively?
A. 50% and $8.00
B. 50% and $5.00
C. $15 and 110%
D. 200% and $5.00
Acer Corporation, which applies manufacturing overhead on the basis of machine-hours, has
provided the following data for its most recent year of operations.

The estimates of the manufacturing overhead and of machine-hours were made at the beginning
of the year for the purpose of computing the company's predetermined overhead rate for the year.

81. The predetermined overhead rate is closest to:

A. $49.23
B. $49.90
C. $49.78
D. $50.45

82. The applied manufacturing overhead for the year is closest to:
A. $218,581
B. $221,023
C. $223,998
D. $221,556

Cahin Corporation applies manufacturing overhead on the basis of machine-hours. At the

beginning of the most recent year, the company based its predetermined overhead rate on total
estimated overhead of $21,060. Actual manufacturing overhead for the year amounted to
$13,000 and actual machine-hours were 1,380. The company's predetermined overhead rate for
the year was $16.20 per machine-hour.

87. The predetermined overhead rate was based on how many estimated machine-hours?
A. 1,380
B. 802
C. 225
D. 1,300
88. The applied manufacturing overhead for the year was closest to:
A. $23,732
B. $21,060
C. $22,356
D. $13,800

Exercise 3.3

55. During May at Landreth Corporation, $81,000 of raw materials were requisitioned from the
storeroom for use in production. These raw materials included both direct and indirect materials.
The indirect materials totaled $7,000. The journal entry to record the requisition from the
storeroom would include a:
A. debit to Raw Materials of $81,000
B. debit to Work in Process of $81,000
C. credit to Manufacturing Overhead of $7,000
D. debit to Work in Process of $74,000

56. In December, Perone Inc. incurred $78,000 of direct labor costs and $4,000 of indirect labor
costs. The journal entry to record the accrual of these wages would include a:
A. debit to Work in Process of $82,000
B. debit to Manufacturing Overhead of $4,000
C. credit to Work in Process of $82,000
D. credit to Manufacturing Overhead of $4,000

Munos Publishing Company uses a job-order costing system to collect costs related to the
manufacture of specialty publications for corporate training.

78. What journal entry would Munos make to record the application of $1,200 of manufacturing
overhead to Job KN672?

A.

B.

C.

D.
79. What journal entry would Munos make to record the completion of Job KN668 at a total cost
of $7,600?

A.

B.

C.

D.

80. What journal entry would Munos make to record $9,500 of depreciation on its printing
presses?

A.

B.

C.

D.

156. During December, Ketchum Corporation purchased $64,000 of raw materials on credit to
add to its raw materials inventory. A total of $80,000 of raw materials was requisitioned from the
storeroom for use in production. These requisitioned raw materials included $7,000 of indirect
materials.

Required:

Prepare journal entries to record the purchase of materials and their use in production.

157. During May, Sarkin Corporation incurred $69,000 of actual Manufacturing Overhead costs.
During the same period, the Manufacturing Overhead applied to Work in Process was $73,000.

Required:

Prepare journal entries to record the incurrence of manufacturing overhead and the application of
manufacturing overhead to Work in Process.
155. The Allen Company uses a job-order costing system. The following activity took place
during the month of March:

Required:
Prepare journal entries to record the information above. Key your entries by the letters a through
i. Assume all purchases are made on account.

Exercise 3.4

69. The following data have been provided by a company:

Compute the amount of direct materials used during November if $20,000 in raw materials were
purchased during the month.
A. $21,000
B. $19,000
C. $18,000
D. $15,000

Eccles Corporation uses a job-order costing system and applies overhead to jobs using a
predetermined overhead rate. During the year the company's Finished Goods inventory account
was debited for $384,000 and credited for $325,900. The ending balance in the Finished Goods
inventory account was $72,100. At the end of the year, manufacturing overhead was
underapplied by $5,400.
128. The balance in the Finished Goods inventory account at the beginning of the year was:
A. $72,100
B. $5,400
C. $14,000
D. $58,100

129. If the applied manufacturing overhead was $174,000, the actual manufacturing overhead
cost for the year was:
A. $193,400
B. $251,500
C. $179,400
D. $168,600

160. Ramil Corporation has provided the following data for the most recent month:

Required:
Prepare T-accounts for Raw Materials, Work in Process, Finished Goods, Manufacturing
Overhead, and Cost of Goods Sold. Record the beginning balances and each of the transactions
listed above. Finally, determine the ending balances.
 Exercise 3.5

61. Lucy Sportswear manufactures a specialty line of T-shirts. The company uses a job-order
costing system. During March, the following costs were incurred on Job ICU2: direct materials
$13,700 and direct labor $4,800. In addition, selling and shipping costs of $7,000 were incurred
on the job. Manufacturing overhead was applied at the rate of $25 per machine-hour and Job
ICU2 required 800 machine-hours. If Job ICU2 consisted of 7,000 shirts, the Cost of Goods Sold
per shirt was:
A. $6.50
B. $6.00
C. $5.70
D. $5.50

65. Sweet Company applies overhead to jobs on the basis of 125% of direct labor cost. If Job 107
shows $10,000 of manufacturing overhead applied, how much was the direct labor cost on the
job?
A. $8,000
B. $12,500
C. $11,250
D. $10,000

Exercise 3.6

66. Pitzer Corporation, a manufacturing company, has provided data concerning its operations
for March. The beginning balance in the raw materials account was $29,000 and the ending
balance was $38,000. Raw materials purchases during the month totaled $74,000. Manufacturing
overhead cost incurred during the month was $106,000, of which $7,000 consisted of raw
materials classified as indirect materials. The direct materials cost for March was:
A. $83,000
B. $58,000
C. $74,000
D. $65,000

67. Jarratt Inc., a manufacturing company, has provided the following data for the month of
September. The balance in the Work in Process inventory account was $21,000 at the beginning
of the month and $24,000 at the end of the month. During the month, the company incurred
direct materials cost of $69,000 and direct labor cost of $31,000. The actual manufacturing
overhead cost incurred was $54,000. The manufacturing overhead cost applied to Work in
Process was $58,000. The cost of goods manufactured for September was:
A. $158,000
B. $154,000
C. $151,000
D. $155,000
68. Erholm Inc. has provided the following data for the month of March. The balance in the
Finished Goods inventory account at the beginning of the month was $43,000 and at the end of
the month was $42,000. The cost of goods manufactured for the month was $221,000. The actual
manufacturing overhead cost incurred was $45,000 and the manufacturing overhead cost applied
to Work in Process was $49,000. The adjusted cost of goods sold that would appear on the
income statement for March is:
A. $218,000
B. $220,000
C. $222,000
D. $221,000

Exercise 3.7

Acer Corporation, which applies manufacturing overhead on the basis of machine-hours, has
provided the following data for its most recent year of operations.

The estimates of the manufacturing overhead and of machine-hours were made at the beginning
of the year for the purpose of computing the company's predetermined overhead rate for the year.

83. The overhead for the year was:

A. $2,994 underapplied
B. $2,444 overapplied
C. $2,444 underapplied
D. $2,994 overapplied

Cahin Corporation applies manufacturing overhead on the basis of machine-hours. At the

beginning of the most recent year, the company based its predetermined overhead rate on total
estimated overhead of $21,060. Actual manufacturing overhead for the year amounted to
$13,000 and actual machine-hours were 1,380. The company's predetermined overhead rate for
the year was $16.20 per machine-hour.

89. The overhead for the year was:

A. $1,296 overapplied
B. $9,356 overapplied
C. $9,356 underapplied
D. $1,296 underapplied
63. Beaver Company used a predetermined overhead rate last year of $2 per direct labor-hour,
based on an estimate of 25,000 direct labor-hours to be worked during the year. Actual costs and
activity during the year were:

The underapplied or overapplied overhead last year was:

A. $1,000 underapplied
B. $1,000 overapplied
C. $3,000 overapplied
D. $2,000 underapplied

70. Wandrie Inc. has provided the following data for the month of October. There were no
beginning inventories; consequently, the direct materials, direct labor, and manufacturing
overhead applied listed below are all for the current month.

Manufacturing overhead for the month was overapplied by $3,000.

The company allocates any underapplied or overapplied overhead among work in process,
finished goods, and cost of goods sold at the end of the month on the basis of the overhead
applied during the month in those accounts.

The cost of goods sold for October after allocation of any underapplied or overapplied overhead
for the month is closest to:
A. $215,600
B. $210,980
C. $210,290
D. $216,290