Page 758 - Accounting Principles (A Business Perspective)

18. Managerial accounting concepts/job costing

e. President's salary.
f. The salary of the supervisor of the people who assemble the product.
g. Wages of the product tester who stands in a shower to make sure the umbrellas do not leak.

h. Cost of market research survey.
i. Salary of the company's sales managers.
j. Depreciation of administrative office building.
Alternate problem B Classify the costs listed in Alternate problem A as either product costs or period costs.
Alternate problem C Presley Manufacturing Company is a producer of music compact discs (CDs) and tapes.
The following account balances are for the year ended 2009 December 31

Administrative expenses $ 60,000
Depreciation expense – Manufacturing equipment 50,000
Direct labor 468,000
Manufacturing supplies expense 40,000
Indirect labor 36,000
Beginning inventories, 2009 January 1:
Direct materials 14,000
Work in process 20,000
Finished goods 128,000
Ending inventories, 2009 December 31
Direct materials 44,000
Work in process 56,000
Finished goods 92,000
Direct materials purchases 216,000
Rent expense – Factory 28,000
Sales 1,400,000
Selling expense 72,000
Other manufacturing overhead 126,000
a. Prepare a statement of cost of goods manufactured for Presley Manufacturing Company for 2009.
b. Prepare an income statement for the year ended 2009 December 31.
Alternate problem D Cathy's Catering Company uses a job cost system. Its activities in November 2010, the
first month of operations, were as follows:
Job
First-rate Active life Precocious
Universityhome School
Direct materials cost (food) $54,000 $36,000 $81,000
Direct labor cost $45,000 $40,500 $54,000
Labor-hours 2,900 3,500 3,800
The company applies overhead at a rate of USD 16 per labor-hour. It completed all jobs in November. The total
revenue for the three jobs was USD 400,000. The actual overhead for the month was USD 160,000, of which USD
120,000 should be credited to Accounts Payable and USD 40,000 should be credited to Accumulated Depreciation.

Prepare journal entries to record the costs of jobs and to record the transfer of completed jobs to Finished Goods
Inventory and to Cost of Goods Sold. Transfer any underapplied or overapplied overhead to Cost of Goods Sold.
The company had no beginning or ending inventories.
Alternate problem E Sullivan Company applied overhead to production using a predetermined overhead rate
based on machine-hours. Budgeted data for 2010 are:
Budgeted machine-hours 75,000
Budgeted manufacturing overhead $870,000
a. Compute the predetermined overhead rate.
b. Assume that in 2010, actual manufacturing overhead amounted to USD 997,500, and 86,000 machine-hours

were used. Compute the amount of underapplied or overapplied manufacturing overhead for 2010.

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