PME CPAR – JOB ORDER COST SYSTEM

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PROBLEMS – MULTIPLE CHOICE

1. Broncho Company. uses a job-order costing system. During April, the following costs appeared in the
Work in Process Inventory account:

Beginning balance $ 24,000

Direct material used 70,000
Direct labor incurred 60,000
Applied overhead 48,000
Cost of goods manufactured 185,000

Broncho Company applies overhead on the basis of direct labor cost. There was only one job left in Work
in Process at the end of April which contained $5,600 of overhead. What amount of direct material was
included in this job?
a. $4,400
b. $4,480
c. $6,920
d. $8,000

Total Costs Incurred 202,000

Less: Cost of Goods Manufactured (185,000)
Costs remaining in WIP 17,000
Overhead 5,600
Direct Labor (5,600/.80) 7,000 (12,600)
Direct Materials 4,400

2. Adams Company is a graphic design shop that produces jobs to customer specifications. During January,
Job #3051 was worked on and the following information is available:

Direct material used $2,500

Direct labor hours worked 15
Machine time used 6
Direct labor rate per hour $7
Overhead application rate per hour of machine time $18

What was the total cost of Job #3051 for January?

a. $2,713
b. $2,770
c. $2,812
d. $3,052
ANS: A
Direct Materials $ 2,500
Direct Labor (15 hours * $7/hour) 105
Factory Overhead (6 hrs machine time *
* $18/mach hr) 108
$ 2,713

Briggs Company

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 PME CPAR – JOB ORDER COST SYSTEM
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PROBLEMS – MULTIPLE CHOICE

Briggs Company uses a job-order costing system. At the beginning of January, the company had two jobs
in process with the following costs:

Direct Material Direct Labor Overhead

Job #456 $3,400 $510 $255
Job #461 1,100 289 ?

Briggs pays its workers $8.50 per hour and applies overhead on a direct labor hour basis.

3. Refer to Briggs Company. What is the overhead application rate per direct labor hour?
a. $ 0.50
b. $ 2.00
c. $ 4.25
d. $30.00
ANS: C
Direct Labor Hours: $510/$8.50 60 hrs
Overhead Application Rate:
$255 / 60 hrs $ 4.25

PTS: 1 DIF: Easy OBJ: 5-3 NAT: AACSB: Analytical Skills

LOC: AICPA Functional Competencies: Measurement, Reporting

4. Refer to Briggs Company. How much overhead was included in the cost of Job #461 at the beginning of
January?
a. $ 144.50
b. $ 153.00
c. $2,200.00
d. $2,456.50
ANS: A
Direct Labor Hours: $289/$8.50 34 hrs
Overhead Application Rate:
$255 / 60 hrs $ 4.25
34 hrs * $4.25/hr $ 144.50

PTS: 1 DIF: Easy OBJ: 5-3 NAT: AACSB: Analytical Skills

LOC: AICPA Functional Competencies: Measurement, Reporting

5. Refer to Briggs Company. During January, Briggs’ employees worked on Job #649. At the end of the
month, $714 of overhead had been applied to this job. Total Work in Process at the end of the month was
$6,800 and all other jobs had a total cost of $3,981. What amount of direct material is included in Job
#649?
a. $ 677.00
b. $1,391.00
c. $2,142.00
d. $4,658.00

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 PME CPAR – JOB ORDER COST SYSTEM
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PROBLEMS – MULTIPLE CHOICE

ANS: A
Direct Materials--Job 649
Total Work in Process $ 6,800
Other Work in Process (3,981)
Costs remaining in WIP 2,819
Overhead 714
Direct Labor (OH  2) $714 * 2 1,428 (2,142)
Direct Materials $ 677

PTS: 1 DIF: Difficult OBJ: 5-3 NAT: AACSB: Analytical Skills

LOC: AICPA Functional Competencies: Measurement, Reporting

Webb Company.

Webb Company uses a job-order costing system and the following information is available from its
records. The company has three jobs in process: #6, #9, and #13.

Raw material used $120,000

Direct labor per hour $8.50
Overhead applied based on direct labor cost 120%

Direct material was requisitioned as follows for each job respectively: 30 percent, 25 percent, and 25
percent; the balance of the requisitions was considered indirect. Direct labor hours per job are 2,500;
3,100; and 4,200; respectively. Indirect labor is $33,000. Other actual overhead costs totaled $36,000.

6. Refer to Webb Company. What is the prime cost of Job #6?

a. $42,250
b. $57,250
c. $73,250
d. $82,750
ANS: B

Direct Materials ($120,000 * 30%) $ 36,000

Direct Labor (2,500 hrs * $8.50) 21,250

Total Prime Costs $ 57,250

PTS: 1 DIF: Moderate OBJ: 5-3 NAT: AACSB: Analytical Skills

LOC: AICPA Functional Competencies: Measurement, Reporting

7. Refer to Webb Company. What is the total amount of overhead applied to Job #9?
a. $18,250
b. $26,350
c. $30,000
d. $31,620
ANS: D
Direct Labor Hours Direct Labor Rate OH Application Rate Total
3,100 $8.50 120% $31,620

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 PME CPAR – JOB ORDER COST SYSTEM
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PROBLEMS – MULTIPLE CHOICE

PTS: 1 DIF: Moderate OBJ: 5-3 NAT: AACSB: Analytical Skills

LOC: AICPA Functional Competencies: Measurement, Reporting

8. Refer to Webb Company. What is the total amount of actual overhead?

a. $36,000
b. $69,000
c. $93,000
d. $99,960
ANS: C

Indirect Materials ($120,000 * 20%) $ 24,000

Indirect Labor 33,000
Other Overhead Costs 36,000
Total Prime Costs $ 93,000

PTS: 1 DIF: Moderate OBJ: 5-3 NAT: AACSB: Analytical Skills

LOC: AICPA Functional Competencies: Measurement, Reporting

9. Refer to Webb Company. How much overhead is applied to Work in Process?

a. $ 69,000
b. $ 99,960
c. $132,960
d. $144,000
ANS: B
Job Labor Hrs
Direct Labor Hours 6 2500
9 3100
13 4200 9,800
Direct Labor Rate $ 8.50
Overhead Application Rate 120%
Total Overhead Applied $ 99,960

PTS: 1 DIF: Moderate OBJ: 5-3 NAT: AACSB: Analytical Skills

LOC: AICPA Functional Competencies: Measurement, Reporting

10. Refer to Webb Company. If Job #13 is completed and transferred, what is the balance in Work in Process
Inventory at the end of the period if overhead is applied at the end of the period?
a. $ 96,700
b. $ 99,020
c. $139,540
d. $170,720
ANS: D
Step 1: Compute Total Cost of Job #6
DM: $120,000 * .30 $ 36,000
DL: 2,500 * 8.50 21,250
FOH: 21,250 * 120% 25,500 82,750
Step 2: Compute Total Cost of Job #9

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 PME CPAR – JOB ORDER COST SYSTEM
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PROBLEMS – MULTIPLE CHOICE

DM: $120,000 * .25 $ 30,000

DL: 3,100 * 8.50 26,350
FOH: 26,350 * 120% 31,620
87,970
Total Costs of Jobs 6 and 9 170,720

PTS: 1 DIF: Difficult OBJ: 5-3 NAT: AACSB: Analytical Skills

LOC: AICPA Functional Competencies: Measurement, Reporting

11. Refer to Webb Company. Assume the balance in Work in Process Inventory was $18,500 on June 1 and
$25,297 on June 30. The balance on June 30 represents one job that contains direct material of $11,250.
How many direct labor hours have been worked on this job (rounded to the nearest hour)?
a. 751
b. 1,324
c. 1,653
d. 2,976
ANS: A
Step 1: Determine DL and FOH
WIP at June 30: $ 25,297
Less DM in WIP 11,250 14,047

Step 2: Separate DL and FOH

Let x = DL; 1.2x = FOH
x + 1.2x = 14,047
2.2x = 14,047
x = $6,385

Step 3: Compute DL Hours

$6,385 ÷ 8.50 751 hours

PTS: 1 DIF: Moderate OBJ: 5-3 NAT: AACSB: Analytical Skills

LOC: AICPA Functional Competencies: Measurement, Reporting

12. Pasado Compounds produces a variety of chemicals that are used by auto manufacturers in their painting
processes. With each batch of chemicals produced, some spoilage naturally occurs. Pasado compound
includes spoilage cost in its predetermined OH rate. For 2016, Pasado Compounds estimated the
following:
Overhead costs other than spoilage $600,000
Estimated spoilage cost 50,000
Estimated sales value of spoiled materials 20,000
Estimated direct labor hours 40,000

a. Pasado Compounds applies overhead based on direct labor hours. Calculate the predetermined overhead
rate.
b. For a batch of chemicals mixed in 2016, the firm experienced normal spoilage on Job #788. The cost of
the spoiled materials amounted to $1,730 and the company estimated the salvage value of those materials
to be $496. Journalize the entry for the spoilage.

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