WESTERN MINDANAO STATE UNIVERSITY

College of Liberal Arts

Accountancy Department

Chapter 4
JOB ORDER COSTING AND PROCESS COSTING

LEARNING OBJECTIVES
After studying this chapter, you should be able to…
1. Describe the flow of costs in a merchandising company and a manufacturing company.
2. Apply the job order costing system in a manufacturing company and a service enterprise.
3. Apply the process costing system in a manufacturing company.

Merchandising Company vs Manufacturing Company

Merchandising Manufacturing
Flow of Costs Beginning Inventory Beginning Raw Materials Inventory
(+) Merchandise Purchases (+) Material Purchases
Cost of Goods available for sale (CGAFS) Total RMI
(-) Ending Inventory (-) Ending RMI
Cost of Goods Sold Raw Materials Used
(+) Beginning Work in Process
(+) Direct Labor
(+) Manufacturing Overhead
Total Manufacturing Cost
(-) Ending Work in Process
Total Cost of Goods Manufactured
(+) Beg. Finished Goods
(-) End. Finished Goods
Cost of Goods Sold

Product Costs Purchase Price of Inventory Material Purchases (RMI)

Direct Labor (WIP)
Manufacturing Overhead (WIP)
Period Costs Selling and administrative Selling and administrative

Journal Entries for the Manufacturing Cost Flow

Raw Materials Inventory XX To record material purchases

AP or Cash XX

Raw Materials Work in Process XX To record the transfer from RMI to

Inventory Raw Materials Inventory XX WIP/Manufacturing Overhead

Manufacturing Overhead XX *WIP – Direct Cost

Raw Materials Inventory XX *Manufacturing OH – Indirect Cost
Work in Process XX
SW payable XX
Salaries and Wages
Payable
Manufacturing Overhead XX
SW Payable XX
Manufacturing Overhead XX To record ACTUAL Manufacturing OH costs
Raw Materials Inventory XX incurred
SW Payable XX
Manufacturing
Other Costs XX
Overhead
Work in Process XX To record APPLIED Manufacturing OH costs
Manufacturing Overhead XX
Work in Process XX To record added costs in work in process
RMI XX
Work in Process
SW Payable XX
Manufacturing Overhead (Applied) XX
Finished Goods Inventory XX To record transfer from WIP to FG
Work in Process XX
Finished Goods
Cost of Goods Sold XX To record goods sold
Finished Goods Inventory XX
There will be a recognition of under or overapplied overhead cost in the Manufacturing OH account. The resulting balance should be
closed to the cost of goods sold. To wit, if overapplied (Credit is larger than the debit), COGS must be credited or decreased. On the
other hand, if underapplied, COGS must be debited or increased.

Manufacturing companies use either job order, process costing or operation costing systems to assign costs to products.

JOB ORDER COSTING SYSTEMS

In a job order cost system, costs are assigned to each job. A job may be an order, a contract, a unit of production, or a batch performed
to meet customer’s specifications. Job order costing is appropriate for companies making different components for inventory. Common
examples are repair services, construction of commercial and residential building, and printing shops.

PROCESS COSTING SYSTEMS

In a process costing system, accountants accumulate cost for each department for a time period and allocate them among all the
products manufactured during the period. Direct material, direct labor, and applied FOH are accumulated for each department for a
period, usually a month. At the end of the period, departmental cost is divided by the number of units produced to obtain a cost per unit.

Unlike the job order, process costing is used when products are produced continuously, that is, when there are no distinguishable
starting and stopping points in the production process. The journal entries used to transfer costs between activities in process costing
are basically the same as those used in job order costing. The way you calculate the unit costs needed to make the journal entries,
however, is different.

WEIGHTED-AVERAGE METHOD

When an activity using a moving average has partially completed units on hand both the beginning and end of the month, the costs of
the beginning inventory are averaged with the current month’s production costs. This average unit cost is then used to calculate the
cost of goods transferred to finished goods and the cost of ending work in process.

a. Calculation of equivalent units (materials and conversion costs)

= Units completed during the period + (Units in ending WIP x Percentage completed this period)

Author’s note: The key to equivalent units is determining the percent complete, especially for materials can be
confusing. Common terms you will see when determine ending work in process percent complete: (For materials)
Description % Complete
Materials added at the beginning of the process 100% complete for materials
Materials added evenly throughout the process Use % complete for ending WIP
Materials added at the end of the process 0% complete for materials

b. Computation of Unit Cost

WA unit cost = (Cost in beginning WIP + Cost added during current period) / WA equivalent units (a)

c. Output Cost
WA cost of units completed and transferred out = Units completed and transferred x WA unit cost
WA cost of ending WIP = WA unit cost x (Units of ending WIP x Completion degree)

FIFO METHOD

When the FIFO method is used, the costs of beginning work in process are separated from current costs. Using the current month’s
costs and equivalent units, a unit cost is calculated for each cost category. The unit costs are used to calculate
(1) the cost of completing beginning work in process and
(2) the cost of units started and completed during the month (current production this month!) and
(3) the cost of partially completed work in process at month end.
Author’s note: (1) and (3) are quite different. Under (1), if the units are 60% complete, the cost of completing the units are 40%.

a. FIFO Equivalent units

= (Units in beginning WIP x Percentage to be completed) + Units started and finished this period + (Units in ending WIP x
Percentage completed this period)

b. Computation of Unit Cost

= Total current manufacturing cost / FIFO equivalent units

c. Output Costs
FIFO cost of units completed and transferred out = Beginning WIP cost + Cost to complete the beginning WIP + Cost of units
started and finished during the current period
FIFO cost of ending WIP = FIFO unit cost x (Units of ending WIP X Completion degree)
OPERATING COSTING

An operation costing system represents a hybrid method, having some of the characteristics of both process and job order costing. For
example, in operation costing, accountants allocate direct materials specifically to the batches. This is like job order costing. They apply
direct labor and overhead to all physical units passing through the operation by using a single average unit conversion cost for the
operation. This is like process costing.

PRACTICE EXERCISES

1. An equivalent unit of material or conversion cost is equal to:

A. the prime cost
B. the amount of material or conversion cost necessary to complete one unit of production
C. a unit of work in process inventory
D. the amount of material or conversion cost necessary to start a unit of production into work in process
E. 50% of the material or conversion cost of a unit of finished goods inventory, assuming a linear production pattern

2. The product flow format where certain portions of the work are done simultaneously and then brought together for
completion is called:
A. applied
B. parallel
C. standard
D. selective
E. sequential

3. An item that does not appear on a cost of production report is:

A. work in processCbeginning inventory
B. cumulative costs through the end of departmental production
C. finished goodsCending inventory
D. materials used in the department
E. unit costs added by the department

4. Goode Manufacturing has three producing departments in its factory. The ending inventory in the Milling Department
consisted of 3,000 units. These units were 60% complete with respect to labor and factory overhead. Materials are
applied at the end of the milling process. Unit costs for the complete process in the Milling Department are: materials,
P1; labor, P2; and factory overhead, P3. The appropriate unit cost for each unit in the ending inventory is:
A. P2
B. P5
C. P3
D. P6
E. P4

5. When added materials in subsequent departments result in an increase of the units produced, the unit transferred-in
costs will:
A. be reclassified as new materials
B. be increased to provide for the additional units
C. be accounted for under the fifo costing method
D. be decreased as they are spread over more units
E. remain unchanged

6. Gyro Products transferred 10,000 units to one department. An additional 3,000 units of materials were added in the
department. At the end of the month, 7,000 units were transferred to the next department. There was no beginning
inventory. The costs for units transferred in would be effectively allocated over:
A. 17,000 units
B. 3,000 units
C. 10,000 units
D. 7,000 units
E. 13,000 units

7. A characteristic of a process costing system is that:

A. costs are accumulated by order
B. it is used by a company manufacturing custom machinery
C. standard costs are not applicable
D. it requires a lot more detailed accounting than does a job order system
E. work in process inventory is restated in terms of completed units

8. Transferred-in costs as used in a process cost accounting system are:

A. supervisory salaries that are transferred from an overhead cost center to a production cost center
B. ending work in process inventory of a previous process that will be used in a succeeding process
 C. labor that is transferred from another department within the same plant instead of hiring temporary workers from
the outside
D. costs of the product of a previous internal process that is subsequently used in a succeeding internal process
E. none of the above

9. In a process costing system, how is the unit cost affected in a production cost report when materials are added in a
department subsequent to the first department and the added materials result in additional units?
A. The first department's unit cost is increased, but it does not necessitate an adjustment of the transferred-in unit
cost.
B. The first department's unit cost is decreased, but it does not necessitate an adjustment of the transferred-in unit
cost.
C. The first department's unit cost is not affected.
D. The first department's unit cost is increased, which necessitates an adjustment of the transferred-in unit cost.
E. The first department's unit cost is decreased, which necessitates an adjustment of the transferred-in unit cost.

10. Assuming that there was no beginning work in process inventory and the ending work in process inventory is 50%
complete as to conversion costs, the number of equivalent units as to conversion costs would be:
A. less than the units completed
B. more than the units completed
C. the same as the units placed in process
D. the same as the units completed
E. less than the units placed in process

11. An error was made in the computation of the percentage of completion of the current year's ending work in process
inventory. The error resulted in assigning a lower percentage of completion to each component of the inventory than
actually was the case. What is the effect of this error upon:
(1) the computation of equivalent units in total
(2) the computation of costs per equivalent unit
(3) costs assigned to cost of goods completed for the period

(1) (2) (3)

A. understate overstate overstate
B. understate understate overstate
C. overstate understate understate
D. overstate overstate understate
E. none of the above

12. Read, Inc. instituted a new process in October. During October, 10,000 units were started in Department A. Of the units
started, 7,000 were transferred to Department B, and 3,000 remained in work in process at October 31. The work in
process at October 31 was 100% complete as to material costs and 50% complete as to conversion costs. Materials
costs of P27,000 and conversion costs of P39,950 were charged to Department A in October. What were the total costs
transferred to Department B?
A. P46,900
B. P53,600
C. P51,800
D. P57,120
E. none of the above

13. In accounting for beginning inventory costs, the method that allows the addition of beginning inventory costs with costs
incurred during the period is referred to as:
A. first-in, first-out
B. addition
C. last-in, first-out
D. average
E. first-in, last-out

14. Chicago Processing Co. uses the average costing method and reported a beginning inventory of 5,000 units that were
20% complete with respect to materials in one department. During the month, 11,000 units were started; 8,000 units were
finished; ending inventory amounted to 8,000 units that were 60% complete with respect to materials. Total materials cost
during the period for work in process should be spread over:
A. 7,200 units
B. 16,000 units
C. 11,200 units
D. 13,200 units
E. 12,800 units

15. In determining the cost of goods transferred in from a previous department under the average cost method:
A. a simple average of unit costs is used
B. beginning inventory costs are separated from costs transferred in during the period
C. a first-in, first-out approach is used
D. equivalent production in ending inventory is separated from other transferred-in costs
 E. a weighted average of unit costs is used

16. The average and fifo process costing methods differ in that the average method:
A. can be used under any cost flow assumption
B. is much more difficult to apply than the fifo method
C. requires that ending work in process inventory be stated in terms of equivalent units of production
D. considers the ending work in process inventory only partially complete
E. does not consider the degree of completion of beginning work in process inventory when computing equivalent
units of production

17. The first step in applying the average cost method is to:
A. add the beginning work in process costs to the current period's production costs
B. divide the current period's production costs by the equivalent units
C. subtract the beginning work in process costs from the current period's production costs
D. A and B
E. B and C

18. Beginning work in process was 60% complete as to conversion costs, and ending work in process was 45% complete as
to conversion costs. The dollar amount of the conversion cost included in ending work in process (using the average cost
method) is determined by multiplying the average unit conversion costs by what percentage of the total units in ending
work in process?
A. 60%
B. 55%
C. 45%
D. 52%
E. 100%

19. Dover Corporation's production cycle starts in the Mixing Department. The following information is available for April:

Units
Work in process, April 1 (50% complete) ....................................................................... 40,000
Started in April ................................................................................................................ 240,000
Work in process, April 30 (60% complete) ..................................................................... 25,000

Materials are added at the beginning of the process in the Mixing Department. Using the average cost method, what are
the equivalent units of production for the month of April?

Materials Conversion
A. 255,000 255,000
B. 270,000 280,000
C. 280,000 270,000
D. 305,000 275,000
E. 240,000 250,000

20. Information concerning Department A of Neeley Company for June is as follows:

Materials
Units Costs
Beginning work in process..................................................................... 17,000 P12,800
Started in June ...................................................................................... 82,000 69,700
Units completed..................................................................................... 85,000
Ending work in process ......................................................................... 14,000

All materials are added at the beginning of the process. Using the average cost method, the cost per equivalent unit for
materials is:
A. P0.825
B. P0.833
C. P0.85
D. P0.97
E. P1.01

21. Kennedy Company adds materials in the beginning of the process in the Forming Department, which is the first of two
stages of its production cycle. Information concerning the materials used in the Forming Department in October is as
follows:

Materials
Units Costs
Work in process, October 1 ................................................................... 6,000 P 3,000
Units started .......................................................................................... 50,000 25,560
Units completed and transferred out ..................................................... 44,000
 Using the average cost method, what was the materials cost of work in process at October 31?
A. P3,000
B. P6,120
C. P3,060
D. P5,520
E. P6,000

22. Roger Company manufactures Product X in a two-stage production cycle in Departments A and B. Materials are added at
the beginning of the process in Department B. Roger uses the average costing method. Conversion costs for Department
B were 50% complete as to the 6,000 units in beginning work in process and 75% complete as to the 8,000 units in
ending work in process. A total of 12,000 units were completed and transferred out of Department B during February. An
analysis of the costs relating to work in process and production activity in Department B for February follows:

Transferred- Materials Conversion

in Costs Costs Costs
Work in process, February 1:
Costs attached ................................................... P12,000 P2,500 P1,000
February activity:
Costs added....................................................... 29,000 5,500 5,000

The total cost per equivalent unit transferred out for February of Product X, rounded to the nearest penny, was:
A. P2.82
B. P2.85
C. P2.05
D. P2.75
E. P2.78

23. Simpson Co. adds materials at the beginning of the process in Department M. The following information pertains to
Department M's work in process during April:

Units
Work in process on April 1
(60% complete as to conversion cost) .................................................................... 3,000
Started in April ................................................................................................................ 25,000
Completed in April .......................................................................................................... 20,000
Work in process on April 30
(75% complete as to conversion cost) .................................................................... 8,000

Under the average costing method, the equivalent units for conversion cost are:
A. 26,000
B. 25,000
C. 24,000
D. 21,800
E. none of the above

24. During March, Quig Company's Department Y equivalent unit product costs, computed under the average cost method,
were as follows:

Materials .................................................. P1
Conversion .............................................. 3
Transferred-in .......................................... 5

Materials are introduced at the end of the process in Department Y. There were 4,000 units (40% complete as to
conversion costs) in work in process at March 31. The total costs assigned to the March 31 work in process inventory
should be:
A. P36,000
B. P28,800
C. P27,200
D. P24,800
E. none of the above

25. If a company reports two different unit costs for goods transferred to the next department, it is reasonable to assume that:
A. the department accounts for lost units at the end of the process
B. a fifo costing method is used
C. lost unit costs are computed separately
D. an average costing method is used
E. errors must have occurred in recording costs

26. In order to compute equivalent units of production using the fifo method of process costing, work for the period must be
broken down to units:
A. started and completed during the period
 B. completed during the period and units in ending inventory
C. completed from beginning inventory, started and completed during the month, and units in ending inventory
D. started during the period and units transferred out during the period
E. processed during the period and units completed during the period

27. The first-in, first-out method of process costing will produce the same cost of goods manufactured amount as the average
cost method when:
A. there is no beginning inventory
B. there is no ending inventory
C. beginning and ending inventories are each 50% complete
D. beginning inventories are 100% complete as to materials
E. goods produced are homogeneous

28. The fifo method of process costing differs from the average cost method of process costing in that fifo:
A. allocates costs based on whole units, but the average cost method uses equivalent units
B. considers the stage of completion of beginning work in process in computing equivalent units of production, but
the average cost method does not
C. does not consider the stage of completion of beginning work in process in computing equivalent units of
production, but the average cost method does
D. is applicable only to those companies using the fifo inventory pricing method, but the average cost method may be
used with any inventory pricing method
E. none of the above

29. Connor Company computed the flow of physical units completed for Department M for the month of March as follows:

Units completed:
From work in process on March 1.............................................................................. 15,000
From March production.............................................................................................. 45,000
Total .................................................................................................................... 60,000

Materials are added at the beginning of the process. The 12,000 units of work in process at March 31 were 80%
complete as to conversion costs. The work in process at March 1 was 60% complete as to conversion costs. Using the
fifo method, the equivalent units for March conversion costs were:
A. 60,600
B. 55,200
C. 57,000
D. 54,600
E. 63,600

30. The Hilo Company computed the physical flow of units for Department A for the month of April as follows:

Units completed:
From work in process on April 1 ................................................................................ 10,000
From April production ................................................................................................ 30,000
Total .................................................................................................................... 40,000

Materials are added at the beginning of the process. Units of work in process at April 30 were 8,000. The work in process
at April 1 was 80% complete as to conversion costs, and the work in process at April 30 was 60% complete as to
conversion costs. What are the equivalent units of production for the month of April using the fifo method?

Materials Conversion Costs

A. 48,000 48,000
B. 40,000 47,600
C. 36,800 38,000
D. 38,000 36,800
E. 48,000 44,800

31. Department A is the first stage of Mann Company's production cycle. The following information is available for conversion
costs for the month of April:

............................................................................................................................. Units
Beginning work in process (60% complete) .................................................................... 20,000
Started in April ................................................................................................................. 340,000
Completed in April and transferred to Department B ....................................................... 320,000
Ending work in process (40% complete) ......................................................................... 40,000

Using the fifo method, the equivalent units for the conversion cost calculation are:
A. 336,000
B. 360,000
C. 328,000
D. 320,000
 E. 324,000

PRACTICE EXERCISES (JOB ORDER COSTING)

1. Under job order cost accumulation, the factory overhead control account controls:
A. factory overhead analysis sheets
B. all general ledger subsidiary accounts
C. job order cost sheets
D. cost reports by processes
E. materials inventories

2. Supplies needed for use in the factory are issued on the basis of:
A. job cost sheets
B. materials requisitions
C. time tickets
D. factory overhead analysis sheets
E. clock cards

3. Finished Goods is debited and Work in Process is credited for a:

A. transfer of completed goods out of the factory
B. transfer of completed production to the finished goods storeroom
C. purchase of goods on account
D. transfer of materials to the factory
E. return of unused materials from the factory

4. In job order costing, when materials are returned to the storekeeper that were previously issued to the factory for cleaning
supplies, the journal entry should be made to:
A. Materials
Factory Overhead
B. Materials
Work in Process
C. Purchases Returns
Work in Process
D. Work in Process
Materials
E. Factory Overhead
Work in Process

5. Under a job order cost system, the dollar amount of the entry to transfer the inventory from Work in Process to Finished
Goods is the sum of the costs charged to all jobs:
A. completed during the period
B. started in process during the period
C. in process during the period
D. completed and sold during the period
E. none of the above

6. When a manufacturing company has a highly automated plant producing many different products, probably the most
appropriate basis of applying factory overhead costs to Work in Process is:
A. units processed
B. machine hours
C. direct labor hours
D. direct labor dollars
E. none of the above

7. Cherokee Company applies factory overhead on the basis of direct labor hours. Budget and actual data for direct labor
and overhead for the year are as follows:

Budget Actual
Direct labor hours ............................................................................. 600,000 650,000
Factory overhead costs .................................................................... P720,000 P760,000

The factory overhead for Cherokee for the year is:

A. overapplied by P20,000
B. overapplied by P40,000
C. underapplied by P20,000
D. underapplied by P40,000
E. neither underapplied nor overapplied

8. At the end of the year, Paola Company had the following account balances after applied factory overhead had been
closed to Factory Overhead Control:
 Factory Overhead Control ........................................................................................ P 1,000 CR
Cost of Goods Sold .................................................................................................. 980,000 DR
Work in Process ....................................................................................................... 38,000 DR
Finished Goods ........................................................................................................ 82,000 DR

The most common treatment of the balance in Factory Overhead Control would be to:
A. carry it as a deferred credit on the balance sheet
B. report it as miscellaneous operating revenue on the income statement
C. credit it to Cost of Goods Sold
D. prorate it between Work in Process and Finished Goods
E. prorate it among Work in Process, Finished Goods, and Cost of Goods Sold

9. Overapplied factory overhead would result if:

A. the plant were operated at less than normal capacity
B. factory overhead costs incurred were less than costs charged to production
C. factory overhead costs incurred were unreasonably large in relation to units produced
D. factory overhead costs incurred were greater than costs charged to production
E. a firm incurred a significant amount of overhead

10. The Waitkins Company estimated Department A's overhead at P255,000 for the period based on an estimated volume of
100,000 direct labor hours. At the end of the period, the factory overhead control account for Department A had a
balance of P265,500; actual direct labor hours were 105,000. What was the over- or under-applied overhead for the
period?
A. P2,250
B. P(2,250)
C. P15,000
D. P(15,000)
E. P(5,000)

11. Howell Corporation has a job order cost system. The following debits (credits) appeared in Work in Process for the
month of July:

July 1, balance .............................................................................................................. P 12,000

July 31, direct materials ................................................................................................. 40,000
July 31, direct labor ....................................................................................................... 30,000
July 31, factory overhead .............................................................................................. 27,000
July 31, to finished goods .............................................................................................. (100,000)

Howell applies overhead to production at a predetermined rate of 90% based on the direct labor cost. Job 1040, the only
job still in process at the end of July, has been charged with factory overhead of P2,250. What was the amount of direct
materials charged to Job 1040?
A. P6,750
B. P2,250
C. P2,500
D. P4,250
E. P9,000

12. Valentino Corporation makes aluminum fasteners. Among Valentino's 19-- manufacturing costs were:

Wages and salaries:

Machine operators ................................................................................................. P80,000
Factory supervisors ............................................................................................... 30,000
Machine mechanics ............................................................................................... 20,000

Direct labor amounted to:

A. P50,000
B. P100,000
C. P110,000
D. P130,000
E. none of the above

13. Rudolpho Corporation makes aluminum fasteners. Among Rudolpho's 19-- manufacturing costs were:

Materials and supplies:

Aluminum .................................................................................................................... P400,000
Machine parts.............................................................................................................. 18,000
Lubricants for machines .............................................................................................. 5,000

Direct materials amounted to:

 A. P23,000
B. P400,000
C. P405,000
D. P418,000
E. P423,000

14. Selected cost data (in thousands) concerning the past fiscal year's operations of the Moscow Manufacturing Company
are presented below.

Inventories
Beginning Ending
Materials ........................................................................................... P75 P 85
Work in process ................................................................................ 80 30
Finished goods ................................................................................. 90 110

Materials used, P326

Total manufacturing costs charged to production during the year (including direct materials, direct labor, and factory
overhead applied at the rate of 60% of direct labor cost), P686
Cost of goods available for sale, P826
Selling and general expenses, P25

The cost of direct materials purchased during the year amounted to:
A. P360
B. P316
C. P336
D. P411
E. none of the above

15. Selected cost data (in thousands) concerning the past fiscal year's operations of the Moscow Manufacturing Company
are presented below.

Inventories
Beginning Ending
Materials ........................................................................................... P75 P 85
Work in process................................................................................ 80 30
Finished goods ................................................................................. 90 110

Materials used, P326

Total manufacturing costs charged to production during the year (including direct materials, direct labor, and factory
overhead applied at the rate of 60% of direct labor cost), P686
Cost of goods available for sale, P826
Selling and general expenses, P25

Direct labor costs charged to production during the year amounted to:
A. P216
B. P135
C. P225
D. P360
E. none of the above

16. Selected cost data (in thousands) concerning the past fiscal year's operations of the Moscow Manufacturing Company
are presented below.

Inventories
Beginning Ending
Materials ........................................................................................... P75 P 85
Work in process................................................................................ 80 30
Finished goods ................................................................................. 90 110

Materials used, P326

Total manufacturing costs charged to production during the year (including direct materials, direct labor, and factory
overhead applied at the rate of 60% of direct labor cost), P686
Cost of goods available for sale, P826
Selling and general expenses, P25

The cost of goods manufactured during the year was:

A. P736
B. P716
C. P636
D. P766
E. none of the above
17. Selected cost data (in thousands) concerning the past fiscal year's operations of the Moscow Manufacturing Company
are presented below.

Inventories
Beginning Ending
Materials ........................................................................................... P75 P 85
Work in process................................................................................ 80 30
Finished goods ................................................................................. 90 110

Materials used, P326

Total manufacturing costs charged to production during the year (including direct materials, direct labor, and factory
overhead applied at the rate of 60% of direct labor cost), P686
Cost of goods available for sale, P826
Selling and general expenses, P25

The cost of goods sold during the year was:

A. P716
B. P691
C. P801
D. P736
E. none of the above

18. J. D. Doonesbury Company manufactures tools to customer specifications. The following data pertain to Job 1501 for
April:

Direct materials used ...................................................................................................... P 4,200

Direct labor hours worked............................................................................................... 300
Direct labor rate per hour................................................................................................ P 8.00
Machine hours used ....................................................................................................... 200
Applied factory overhead rate per machine hour ............................................................ P 15.00

What is the total manufacturing cost recorded on Job 1501 for April?
A. P9,600
B. P10,300
C. P11,100
D. P5,400
E. P8,800

19. In service businesses using job order costing, the most commonly used base for applying overhead to jobs is:
A. machine hours
B. direct materials consumed
C. direct labor cost
D. meals, travel, and entertainment
E. none of the above

20. In service businesses using job order costing, the hourly rate used to charge costs to a job usually includes:
A. both labor and overhead cost
B. labor cost only
C. overhead cost only
D. labor, overhead, and miscellaneous costs
E. none of the above

21. Work in Process is debited and Materials is credited for:

A. the issuance of direct materials into production
B. the issuance of indirect materials into production
C. the return of materials to the storeroom
D. the application of materials overhead
E. none of the above

22. Factory Overhead Control is debited and Payroll is credited for:

A. the recording of payroll
B. the distribution of indirect labor costs
C. the distribution of direct labor costs
D. the distribution of withholding taxes
E. none of the above

23. Applied Factory Overhead is debited and Factory Overhead is credited to:
 A. close the estimated overhead account to actual overhead
B. record the actual factory overhead for the period
C. charge estimated overhead to all jobs worked on during the period
D. to record overapplied overhead for the period
E. none of the above

24. The best overhead allocation base to use in a labor-intensive manufacturing environment probably would be:
A. materials cost
B. machine hours
C. direct labor hours
D. units of production
E. none of the above

25. Finished Goods is debited and Cost of Goods Sold is credited for:
A. transfer of completed goods to the customer
B. sale of a customer order
C. return of materials to the supplier
D. return of goods by the customer
E. none of the above

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