chapter 5: job costing

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1. Chapter 5: Job Costing Slide # 1

2. Chapter 5: Job Costing Slide # 2 This slide is entirely automated – no clicks required.This slide is entirely automated – no clicks required.

3. Chapter 5: Job Costing Slide # 3 Q1: Assigning Costs to Jobs This slide is entirely automated.This slide is entirely automated.

4. Chapter 5: Job Costing Slide # 4 Q1: Job Cost Records The first click brings in the materials requisition forms label; this is hidden after the next mouse click The second click brings in the labor time reports label; this is hidden after the next mouse click The third click brings in the overhead allocation labelThe first click brings in the materials requisition forms label; this is hidden after the next mouse click The second click brings in the labor time reports label; this is hidden after the next mouse click The third click brings in the overhead allocation label

5. Chapter 5: Job Costing Slide # 5 Q2: Allocating Overhead Costs to Jobs The first bullet point is automated. Then, one click is required for each remaining bullet point.The first bullet point is automated. Then, one click is required for each remaining bullet point.

6. Chapter 5: Job Costing Slide # 6 Q2: Overhead Allocation Rates The first click brings in the bullet that states the actual allocation rate cannot be computed until the end of the year. The second click brings in the bullet that states the estimated allocation rate can be computed at the beginning of the year.The first click brings in the bullet that states the actual allocation rate cannot be computed until the end of the year. The second click brings in the bullet that states the estimated allocation rate can be computed at the beginning of the year.

7. Chapter 5: Job Costing Slide # 7 Chausse Manufacturing makes road paving equipment. At the beginning of the year, overhead costs were estimated to be $450,000. However, actual overhead was $504,000. Chausse uses direct labor hours as the cost allocation base. At the beginning of the year, total direct labor hours were estimated at 10,000 hours, but actual direct labor hours for the year totaled 12,000 hours. Compute the actual overhead rate and the estimated overhead rate. Q2: Overhead Allocation Rates

8. Chapter 5: Job Costing Slide # 8 Serena-Sturm is an architectural firm with a professional staff of 5 architects and a support staff of 7. Some projects are done for a fixed fee, while others are billed for the actual hours spent on the project. You are given the following information for Serena-Sturm (SS) for 2005. What is the estimated indirect cost rate if # of projects is used as the cost allocation base? Is this a good choice for the cost allocation base? Q3: Job Costing Example (Service Sector) The given information is automated. The first click reveals the computation of the indirect cost rate. The second click brings in the text box about “terrible choice”.The given information is automated. The first click reveals the computation of the indirect cost rate. The second click brings in the text box about “terrible choice”.

9. Chapter 5: Job Costing Slide # 9 SS has a costing system with a single direct cost pool. If SS uses a single indirect cost pool, determine both the estimated and actual indirect cost rates using (a) number of professional labor hours and (b) number of blueprints prepared as cost allocation bases. Q3: Job Costing Example (Service Sector) The given info and the table for the solution are automated. The first click reveals the answer for the actual rate column. The second click reveals the answer for the estimated rate column. The given info and the table for the solution are automated. The first click reveals the answer for the actual rate column. The second click reveals the answer for the estimated rate column.

10. Chapter 5: Job Costing Slide # 10 SS was asked to prepare a fixed fee bid for an out-of-town project called The Culebra Complex. The budgeted professional hours for this project was 400, and the job is expected to require the preparation of 7 blueprints. Compute the budgeted project cost using (a) professional labor hours and (b) number of blue prints prepared as a cost driver for indirect costs. Q3: Job Costing Example (Service Sector) The given information, the estimated rates computed on the prior slide, and the table for the solutions are all automated. The first click shows the computation for the direct cost row of the table. The second click shows the computation for the indirect cost row and the total row of the table.The given information, the estimated rates computed on the prior slide, and the table for the solutions are all automated. The first click shows the computation for the direct cost row of the table. The second click shows the computation for the indirect cost row and the total row of the table.

11. Chapter 5: Job Costing Slide # 11 Why do the different cost allocation bases yield vastly different project costs? Q3: Why Are Costs so Different? Most of this slide is automated. The first click brings in the top text box about professional labor hours as a measure of activity, which disappears on the next mouse click. The second click brings in the bottom text box about # blueprints as a measure of activity.Most of this slide is automated. The first click brings in the top text box about professional labor hours as a measure of activity, which disappears on the next mouse click. The second click brings in the bottom text box about # blueprints as a measure of activity.

12. Chapter 5: Job Costing Slide # 12 Relevant Questions in Sample Quiz2 Direct Direct Direct Materials Labor Cost Labor Hours Job 200 $ 500 $ 800 40 Job 201 $ 350 $ 200 10 Job 202 $1,000 $ 600 30 Franks Fabricating uses job costing and applies overhead using a normal costing system and uses direct labor cost as the allocation base. This period’s estimated overhead cost is $100,000 and estimated direct labor cost of $50,000 and 2,500 direct labor hours. 1. What is the overhead allocation rate? a. 200% b. 50% c. 30% d. 60% 2. What is the total manufacturing cost of Job 201? a. $550 b. $950 c. $850 d. $1,500

13. Chapter 5: Job Costing Slide # 13 Relevant Questions in Sample Exam2 Direct Direct Direct Materials Labor Cost Labor Hours Job 400 $200 $800 40 Job 401 $250 $200 10 Job 402 $500 $600 32 Sparkle Company uses job costing and applies overhead using an actual costing system using direct labor hours as the allocation base. This period’s estimated overhead cost is $400,000, estimated direct labor cost is $500,000 and estimated direct labor hours are 25,000. This period actual overhead cost was $420,000, actual direct labor cost was $390,000, and actual direct labor hours were 20,000. 3. What is the overhead allocation rate? a. $21/hour b. $10/hour c. $16/hour d. $18/hour 4. What is the total manufacturing cost of Job 402? a. $1,100 b. $1,772 c. $1,320 d. $1,640

14. Chapter 5: Job Costing Slide # 14 Q3: Job Costing versus Process Costing Job costing is best used when products can be distinguished from one another. The first bullet is automated, then one click required for the 2 remaining bullets.The first bullet is automated, then one click required for the 2 remaining bullets.

15. Chapter 5: Job Costing Slide # 15 Q3: Job Costing versus Process Costing This slide has no animationThis slide has no animation

16. Chapter 5: Job Costing Slide # 16 Q4: Actual and Normal Costing This slide is entirely automated.This slide is entirely automated.

17. Chapter 5: Job Costing Slide # 17 Relevant Questions in Sample Exam2 1. Job order costing is used when products are a. Mass produced b. Custom produced or processed in small batches c. Uniform in their use of materials d. Easy to cost 2. In an actual costing system, the overhead allocation rate is calculated as a. Actual overhead cost + actual quantity of allocation base b. Actual overhead cost ? actual quantity of allocation base c. Actual quantity of allocation base ? actual overhead cost d. Actual overhead cost ? estimated quantity of allocation base

18. Chapter 5: Job Costing Slide # 18 Q4: Journal Entries in Job Costing Flow of costs matches flow of the goods through the factory The first bullet is animated. The first click brings in the second bullet. The second click brings in the third bullet. The third click brings in the fourth bullet, and its two secondary bullets are automated. The first bullet is animated. The first click brings in the second bullet. The second click brings in the third bullet. The third click brings in the fourth bullet, and its two secondary bullets are automated.

19. Chapter 5: Job Costing Slide # 19 Q4: Job Costing in Manufacturing This slide is entirely automated. I use it as an example about how the flow of work matches the flow of costs.This slide is entirely automated. I use it as an example about how the flow of work matches the flow of costs.

20. Chapter 5: Job Costing Slide # 20 Q4: Journal Entries in Job Costing The first click reveals the first journal entry. The second click reveals the second journal entry. The first click reveals the first journal entry. The second click reveals the second journal entry.

21. Chapter 5: Job Costing Slide # 21 Q4: Journal Entries in Job Costing The first click reveals the first journal entry. The second click reveals the second journal entry. The first click reveals the first journal entry. The second click reveals the second journal entry.

22. Chapter 5: Job Costing Slide # 22 Q4: Journal Entries in Job Costing The first click reveals the first journal entry. The second click reveals the second journal entry. The first click reveals the first journal entry. The second click reveals the second journal entry.

23. Chapter 5: Job Costing Slide # 23 Relevant Questions in Sample Exam2 5. What is the appropriate journal entry if direct materials of $50,000 and indirect materials of $3,000 are sent to the manufacturing plant floor? a. Manufacturing Overhead Control 3,000 Materials Control 50,000 Work-in-Process Control 53,000 b. Work-in-Process Control 53,000 Materials Control 53,000 c. Work-in-Process Control 50,000 Materials Control 50,000 d. Work-in-Process Control 50,000 Manufacturing Overhead Control 3,000 Materials Control 53,000

24. Chapter 5: Job Costing Slide # 24 Under normal costing, actual overhead is different from allocated overhead. Q4: Disposition of Misallocated Overhead The first bullet is animated. The first click brings in the second bullet. The second click brings in the third bullet. The third click brings in the fourth bullet.The first bullet is animated. The first click brings in the second bullet. The second click brings in the third bullet. The third click brings in the fourth bullet.

25. Chapter 5: Job Costing Slide # 25 Q4: Disposition of Misallocated Overhead

26. Chapter 5: Job Costing Slide # 26 Relevant Questions in Sample Exam2 6. Following are the budgeted costs for a manufacturing plant producing custom products: Materials (70% direct and 30% indirect) $15,000 Labor (60% direct and 40% indirect) 12,000 Supervision 5,000 Depreciation 10,000 Utilities 4,860 Total $46,860 The company uses a normal costing system, and overhead is allocated on the basis of direct labor cost. If actual direct labor cost was $7,500, the overhead allocated was a. $29,160 b. $20,688 c. $30,375 d. $48,813

27. Chapter 5: Job Costing Slide # 27 Relevant Questions in Sample Exam2 Tulalip uses a job costing system that allocates overhead as a percentage of direct labor costs. The budget for this year was: direct materials $60,000, direct labor $30,000, and overhead $45,000. Actual costs for this year were: direct materials $50,000, direct labor $35,000, and overhead $45,000. 7. What is the over- or underapplied overhead for this year? a. $0 b. $150 overapplied c. $21,550 underapplied d. $7,500 overapplied

28. Chapter 5: Job Costing Slide # 28 Relevant Questions in Sample Exam2 8. Assume that variable overhead is overapplied by $200 and fixed overhead is underapplied by $100. If these variances are considered immaterial, the effect on cost of goods sold is a. $300 increase b. $100 increase c. $300 decrease d. $100 decrease

29. Chapter 5: Job Costing Slide # 29 Q5: What are the Uses and Limitations of Job Cost Information? The first primary bullet and its secondary bullets are automated. The first click brings in the second primary bullet and its secondary bulletThe first primary bullet and its secondary bullets are automated. The first click brings in the second primary bullet and its secondary bullet

30. Chapter 5: Job Costing Slide # 30 Relevant Questions in Sample Exam2 9. Which of the following statements regarding the uses and limitations of job costing is true? a. Job costs are measured accurately b. The total job cost of an individual unit is an incremental cost, that is, it does not include average costs of any type c. Developing information within job costing systems requires judgment d. Job costing systems are not subject to uncertainties

31. Chapter 5: Job Costing Slide # 31 Spoilage – unacceptable units that are discarded or sold for disposal costs Q6: Job Costing and Spoilage - Terminology The first primary bullet, and its two secondary bullets are automated. The first click brings in the second bullet. The second click brings in the third bullet.The first primary bullet, and its two secondary bullets are automated. The first click brings in the second bullet. The second click brings in the third bullet.

32. Chapter 5: Job Costing Slide # 32 Q6: Job Costing and Spoilage In job costing, spoilage could be normal spoilage that coincidentally occurred on this job, but was not due to any demanding aspects of this job spoilage costs removed from Work in process inventory spoilage costs are debited to Overhead cost control in this case a job without spoilage has the same manufacturing cost per unit as a job where spoilage occurred This slide is entirely automated.This slide is entirely automated.

33. Chapter 5: Job Costing Slide # 33 Q6: Job Costing and Spoilage In job costing, spoilage could be abnormal spoilage that coincidentally occurred on this job, but was not due to any demanding aspects of this job spoilage costs removed from Work in process inventory spoilage costs are debited to Loss from abnormal spoilage in this case a job without spoilage has the same manufacturing cost per unit as a job where spoilage occurred This slide is entirely automated.This slide is entirely automated.

34. Chapter 5: Job Costing Slide # 34 Q6: Job Costing and Spoilage In job costing, spoilage could be spoilage that occurred on this job due to the job’s demanding specifications spoilage costs are not removed from Work in process inventory in this case a job without spoilage has a lower manufacturing cost per unit than a job where this type of spoilage occurred This slide is entirely automated.This slide is entirely automated.

35. Chapter 5: Job Costing Slide # 35 Q6: Job Costing and Spoilage Example

36. Chapter 5: Job Costing Slide # 36 Q6: Job Costing and Spoilage Example

37. Chapter 5: Job Costing Slide # 37 Q6: Job Costing and Spoilage Example

38. Chapter 5: Job Costing Slide # 38 Q7: Effect of Spoilage Accountingon Manager Behavior If spoilage costs are ignored, there is no incentive for managers to control these costs. The first bullet is automated. One click for each remaining bullet.The first bullet is automated. One click for each remaining bullet.

39. Chapter 5: Job Costing Slide # 39 Relevant Question in Sample Quiz2 3. Abnormal spoilage costs appear on the a. Balance sheet as part of work in process b. Income statement as part of cost of good sold c. Balance sheet as part of finished goods d. Income statement as a loss

40. Chapter 5: Job Costing Slide # 40 Relevant Questions in Sample Exam2 10. Mike’s Bikes makes gears for mountain bikes. It is considered normal for 3% of the good gears in a batch to be defective. The spoilage costs of a defective gear are $20, but a defective gear can be sold for $5 as scrap. Batch #248 contains 103 gears, and 3 are defective. Which of the following is the correct entry to record the costs of spoilage and the sale of the scrap? a. Cash 15 Loss from abnormal spoilage 45 Work in process inventory 60 b. Work in process inventory 45 Cash 15 Overhead control 60 c. Cash 15 Overhead control 45 Work in process inventory 60 d. Cash 15 Finished goods inventory 45 Work in process inventory 60

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