St.

Mary’s University

Exercises on Job-order Costing

1. Bandway Corporation manufactures brass musical instruments for use by high
school students. The company uses normal costing, in which manufacturing
overhead is applied on the basis of direct labor hours. The company’s budget for the
current year included the following predictions.
Budgeted total manufacturing overhead…………………… $411,600
Budgeted total direct labor hours…………………………... 19,600
During March, the firm worked on the following production jobs:
Job number T81, consisting of 76 trombones
Job number C40, consisting of 110 cornets
The events of March are described as follows:
a. One thousand square feet of rolled brass sheet metal was purchased for $5,000 on
account.
b. Four hundred pounds of brass tubing was purchased on account for $4,000.
c. The following requisitions were filled on March 5.
Requisition number 112: 250 square feet of brass sheet metal at $5 per square foot
(for job number T81)
Requisition number 113: 1,000 pounds for brass tubing, at $10 per pound (for job
number C40)
Requisition number 114: 10 gallons of valve lubricant, at $10 per gallon.
All brass used in production is treated as direct material. Valve lubricant is an
indirect material.
d. An analysis of labor time ticket revealed the following labor usage for March.
Direct labor: job number T81, 800hrs at $20per hour.
Direct labor: Job number C40, 900hrs at $20per hour.
Indirect labor: General factory cleanup, $4,000.
Indirect labor: Factory supervisor salaries, $9,000.
e. Depreciation of the factory building and equipment during March amounted to
$12,000.
f. Rent paid in cash for warehouse space used during March was $1,200.
g. Utility costs incurred during March of the factory amounted to $2,100. The
invoices for these costs were received bout the bills were not paid in March.
h. March property taxes on the factory were paid in cash, $2,400.
i. The insurance cost covering factory operations for the month of March was
$3,100. The insurance policy has been prepaid.
j. The cost of salaries and fringe benefits for sales and administrative personnel paid
in cash during March amounted to $8,000.
k. Depreciation on administrative office equipment and space amounted to $4,000.
l. Other selling and administrative expenses paid in cash during March amounted to
$1,000.
m. Job number T81 was completed during March.
n. Half of tombstones in Job number T81 were sold on account during March for
$700 each.

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The March 1 balances in selected accounts are as follows:

Cash………………………………………………………………. $10,000
Account Receivable………………………………………………... 21,000
Prepaid Insurance…………………………………………………… 5,000
Raw-materials Inventory………………………………………… 149,000
Manufacturing Supplies inventory……………………………………. 500
Work-in Process Inventory………………………………………… 91,000
Finished-Goods Inventory………………………………………….220, 000
Accumulated Depreciation: buildings and equipment……………… 102,000
Account Payable…………………………………………………… 13,000
Wages Payable……………………………………………………… 8, 000
Required:
1. Calculate the company’s predetermined overhead rate for the year.
2. Prepare journal entries to record the events of March.
3. Set-up T-accounts, and post the journal entries made in requirement (2)
4. Calculate the overapplied or underapplied overhead for March. Prepare a journal
entry close this balance to Cost of Goods Sold.
5. Prepare a schedule of cost of goods manufactured for March.
6. Prepare a schedule of cost of goods sold for March.
7. Prepare an income statement for March.

2. Sea Voyager Corporation manufactures outboard motors and an assortment of other

marine equipment. The company uses a job-order costing system. Normal costing is
used, and manufacturing overhead is applied on the basis of machine hours.
Estimated manufacturing overhead for the year is $1,464,000 and management
expects that 73,200 machine hours will be used.
Required:
(1) Calculate the company’s predetermined overhead rate for the year.
(2) Prepare journal entries to record the following events, which occurred
during April.
a. The firm purchased marine propellers from Martin Marine Corporation for $7,850
on account.
b. A requisition was filed by the Gauge Department supervisor for 300 pounds clear
plastic, which is considered as direct material. The material cost $0.60per pound
when it was purchased.
c. The Motor Testing Department supervisor requisitioned 300 feet of electrical
wire, which is considered an indirect material. The wire cost $0.10 per foot when
it was purchased.
d. An electric utility bill for factory of $800 was paid in cash.
e. Direct-labor costs incurred in April were $75,000.
f. April’s insurance cost was $1,800 for insurance on the cars driven by sales
personnel. The policy had been prepaid in March.
g. Metal tubing costing $3,000 was purchased on account.
h. A cash payment of $1,700 was made on outstanding accounts payable.
i. Depreciation on factory equipment for April amounted to $7,000.
j. Indirect labor costs of $21,000 were incurred during April.

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k. Job number G22, consisting of 50 tachometers was finished during April. The
total cost of the job was $1,100.
l. During April 7,000 machine hours were used.
m. Sales on account for April amounted to $176,000. The cost of goods sold in April
was $139,000.

3. The following data refers to Franconia Corporation for the year 2004.
Sales Revenue ……………………………………………………… $2,105,000
Raw-material Inventory, 12/31/03……………………………………. 89,000
Purchase of raw materials in 2004………………………………………..731,000
Raw-material inventory, 12/31/04………………………………………… 59,000
Direct labor cost incurred…………………………………………………..474,000
Selling & Administrative expenses………………………………………269,000
Indirect labor cost incurred………………………………………………...150,000
Property taxes on factory……………………………………………………90,000
Depreciation on factory building…………………………………………..125,000
Income tax expense………………………………………………………… 25,000
Indirect material used………………………………………………………..45,000
Depreciation on factory equipment……………………………………….60, 000
Insurance on factory & equipment………………………………………… 40,000
Utilities for factory………………………………………………………… 70,000
Work-in Process inventory, 13/31/03………………………………………. 0
Work-in Process inventory, 12/31/04……………………………………….40,000
Finished-Goods inventory, 12/31/03………………………………………..35,000
Finished-Goods inventory, 12/31/04………………………………………40,000
Applied manufacturing overhead…………………………………………..577,500
Required:
a. Prepare Franconia’s schedule of cost of goods manufactured.
b. Prepare Franconia’s schedule of cost of goods sold for 2004. The
company closes overapplied or underapplied overhead into cost of goods
sold.
c. Prepare Franconia’s income statement for 2004.

4. Film Specialists Inc., operates a small production studio in which advertising films
are made for TV and other uses. The company uses a job-order costing system to
accumulate costs for each film produced. The company trial balance as of May 1,
the start of its fiscal year, is given as follows:
Cash…………………………………………………$60,000
Accounts Receivable……………………………… 210,000
Materials and Supplies………………………………130, 000
Film in Process……………………………………… 75,000
Finished Films……………………………………… 860,000
Prepaid Insurance…………………………………… 90,000
Studio & Equipment………………………………..5,200,000
Accumulated Depreciation………………………………………1, 990,000
Accounts Payable…………………………………………………..700,000

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Salaries and Wages Payable………………………………………... 35,000

Capital stock……………………………………………………2,500,000
Retained Earnings……………………………………………....1,400,000
Total $6,625,000 $6,625,000
Film Specialists Inc. uses a production overhead account to record all transactions
relating to overhead costs and applies overhead costs o to jobs on the basis of camera
hours. For the current year, the company estimated that it would incur $1,350,000 in
production overhead costs, and film 15,000 camera hours. During the year, the following
transactions were completed:

a. Materials and supplies purchased on account, $690,000.

b. Materials and supplies issued from storeroom for use in production of various
films, $700,000 (80% direct to the films and 20% indirect)
c. Utility costs incurred in the production studio, $90,000.
d. Costs for employee salaries and wages were incurred as follows:
Actors, directors, and camera crew………..$ 1,300,000
Indirect labor costs of support workers………….230, 000
Marketing and administrative salaries………….650, 000
e. Advertising costs incurred $800,000.
f. Prepaid insurance expired during the year, $70,000. Of this amount, $60,000
related to the operation of the production studio, and $10,000 to the company’s
marketing and administrative activates.
g. Depreciation recorded for the year, $650,000 (80% represent deprecation for
production and 20% for marketing and administrative activities).
h. Rental cots incurred on various facilities and equipment used in production of
films, $360,000; and rental costs incurred in marketing and administrative,
$40,000.
i. Production overhead was applied on jobs filmed during the year. The company
recorded 16,500 camera hours.
j. Films that cost $3,400,000 to produce according to their job cost sheets were
completed during the year.
k. Sales of films for the year (all on account) totaled $6,000,000. The total costs to
produce these films were $4,000,000 according to their job cost sheets.
l. Collections on account from customers during the year, $ 5,400,000.
m. Cash payments made during the year, to creditors on account, $2,500,000; and to
employees for salaries and wages, $2,200,000.

Required:
1. Prepare journal entries to record the year’s transactions.
2. Prepare a T-account for each account in the company’s trial balance and
enter the opening balances given above. Post your journal entries and
determine the ending balance in each account.
3. Is production overhead underapplied or overapplied? Prepare the
necessary journal entry to close the balance to COGS.
4. Prepare an income statement for the year. ( Do not prepare a schedule of
cost of goods manufactured.)

Cost & Management Accounting I/ Exercises on Job-order costing 4