Record the journal entry to close over- or underapplied factory overhead to Cost of Goods Sold for each of the separate cases below.

	JK Concert Promotions	EL Home Builders
Actual indirect materials costs	$12,000	$ 6,500
Actual indirect labor costs	56,000	46,500
Other overhead costs	17,000	49,000
Overhead applied	96,200	106,800

Road Warriors’ job cost sheet for job A75 displays that the cost to add security features to a car was $13,500. The car was delivered to the customer, who paid$18,900 in cash for the added features. What journal entries should Road Warriors record for the completion and delivery of job A75?

Refer to information in the previous problem. Prepare the journal entry to allocate (close) overapplied or underapplied overhead to Cost of Goods Sold.

Consider that Apple produces a batch of 1,000 iPods. Does it account for this as 1,000 individual jobs or as a job lot? Explain (consider costs and benefits).

At the start of a period a company predicts total direct materials costs of $175,000 and total overhead costs of$218,750. If the company uses direct materials costs as its activity base to allocate overhead, what is the predetermined overhead rate it should use during the period?

Use information in the previous problem to prepare journal entries for the following events for the month of May.

1. Factory overhead excluding indirect materials and indirect labor (record credit to Other Accounts).
2. Application of overhead to goods in process.

Pak Co.’s August 31 inventory of raw materials is $16,000. Raw materials purchases in September are$60,000, and factory payroll cost in September is $68,000. Overhead costs incurred in September are: indirect materials,$6,000; indirect labor, $4,000; factory rent,$24,000; factory utilities, $22,000; and factory equipment depreciation,$25,000. The predetermined overhead rate is 130% of direct labor cost. Job 114 is sold for $100,000 cash in September. Costs for the three jobs worked on in September follow.

Required 1. Calculate the total of each production cost incurred for September (direct labor, direct materials, and applied overhead), and the total cost assigned to each job (including the balances from August 31).
2. Prepare journal entries for the month of September to record the following.
 a. Materials purchases (on credit), factory payroll (paid in cash), and actual overhead costs including indirect materials and indirect labor. (Factory rent and utilities are paid in cash.)
 b. Assignment of direct materials, direct labor, and applied overhead costs to Goods in Process Inventory.
 c. Transfer of Jobs 114 and 115 to the Finished Goods Inventory.
 d. Cost of Job 114 in the Cost of Goods Sold account.
 e. Revenue from the sale of Job 114.
 f. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)
3. Prepare a manufacturing statement for September (use a single line presentation for direct materials and show the details of overhead cost).
4. Compute gross profit for September. Show how to present the inventories on the September 30 balance sheet.

Analysis Component
5. The over- or underapplied overhead adjustment is closed to Cost of Goods Sold. Discuss how this adjustment impacts business decision making regarding individual jobs or batches of jobs.

Winfrey Co.’s March 31 inventory of raw materials is $150,000. Raw materials purchases in April are$400,000, and factory payroll cost in April is $220,000. Overhead costs incurred in April are: indirect materials,$30,000; indirect labor, $14,000; factory rent,$20,000; factory utilities, $12,000; and fac tory equipment depreciation,$30,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $380,000 cash in April. Costs of the three jobs worked on in April follow.

Required 1. Calculate the total of each production cost incurred for April (direct labor, direct materials, and applied overhead), and the total cost assigned to each job (including the balances from March 31).
2. Prepare journal entries for the month of April to record the following.
 a. Materials purchases (on credit), factory payroll (paid in cash), and actual overhead costs includ ing indirect materials and indirect labor. (Factory rent and utilities are paid in cash.)
 b. Assignment of direct materials, direct labor, and applied overhead costs to the Goods in Process Inventory.
 c. Transfer of Jobs 306 and 307 to the Finished Goods Inventory.
 d. Cost of goods sold for Job 306.
 e. Revenue from the sale of Job 306.
 f. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)
3. Prepare a manufacturing statement for April (use a single line presentation for direct materials and show the details of overhead cost).
4. Compute gross profit for April. Show how to present the inventories on the April 30 balance sheet.

Analysis Component
5. The over- or underapplied overhead is closed to Cost of Goods Sold. Discuss how this adjustment impacts business decision making regarding individual jobs or batches of jobs.

Why should a company estimate the amount of factory overhead assigned to individual jobs or job lots?

Match the terms below with their meaning.

1. Job
2. Job order production
3. Job lot
4. Cost accounting system
5. Target cost
6. General accounting system

a. The expected selling price of a job minus its desired profit.
b. Production activities for a customized product.
c. A system that records manufacturing costs using a perpetual inventory system.
d. Production of products in response to customer orders.
e. Production of more than one unit of a custom product.
f. A system that records manufacturing costs using a periodic inventory system.

Identify which products are most likely to be manufactured as a job and which as a job lot.

1. A hand-crafted table.
2. A 90-foot motor yacht.
3. Wedding dresses for a chain of stores.
4. A custom-designed home.
5. Hats imprinted with company logo.
6. Little League trophies.

R&R Tax Service offers tax and consulting services to individuals and small businesses. Data for fees and costs of three types of tax returns follow. R&R provides services in the ratio of 5:3:2 (easy, moderate, business). Fixed costs total $18,000 for the tax season. Use this information to determine the (1) selling price per composite unit, (2) variable costs per composite unit, (3) break-even point in composite units, and (4) number of units of each product that will be sold at the break-even point.$

$$\begin{matrix} \text{Type of Return } & \text{Fee Charged} & \text{Variable Cost per Return}\\ \text{Easy (Form 1040EZ)}\ldots\ldots\ldots & \text{\$ 50} & \text{\$ 30}\\ \text{Moderate (Form 1040)}\ldots\ldots\ldots & \text{125} & \text{75}\\ \text{Business} \ldots\ldots\ldots & \text{275} & \text{100}\\ \end{matrix}$$

$

Consider the following pairs of loan options for a $\$ 120,000$ mortgage. Calculate the monthly payment and total closing costs for each option. Explain which option you would choose and why.

Choice $1$: $30$-year fixed rate at $3.5 \%$ with closing costs of $\$ 1000$ and no points

Choice $2$: $30$-year fixed rate at $3 \%$ with closing costs of $\$ 1500$ and $4$ points

A company that manufactures compact discs has fixed monthly overhead costs of $\$ 60,000$. Each disc costs $\$ 0.18$ to produce and sells for $\$ 0.30$.

b. Write the revenue function, $R$, from the sale of $x$ discs per month.