Job-order costing system

Custom Metal Works Products uses a Job-order costing system. Overhead costs applied to jobs
on the basis of machine hours, at the beginning of the year, management estimated that
85,000 machine-hours would be required for the periods estimated level of production. The
company also estimated $106,250 of fixed manufacturing overhead expenses for the coming
period and variable manufacturing overhead of $0.75 per machine hour.
1. Compute the companys predermined overhead rate.
2. Assume that during the year the company actually works only 80,000 machine-hours and
incurs the following costs in the manufacturing overhead and work in process accounts:
Copy the data in the T-accounts above onto your answer and compute the amount of the
overhead cost that would be applied to Work in Process for the year, and make the entry in
your T-accounts.
3. Compute the amount of underapplied or overapplied overhead for the year, and show the
balance in your Manufacturing overhead T-account. Prepare a journal entry to close out the
balance in this account to cost of goods sold.
4. Explain why the manufacturing overhead was underapplied or overapplied for the year.
The CCPV Company manufactures a high quality plastic pipe that goes through three
processing stages prior to completion.
Information on work in the first department, cooking, is giving below for May:
Production data:
Pounds in process, May 1: materials 100%
Complete; conversion 90% complete 70,000
Pounds started into production during May . 350,000
Pounds completed and transferred to the next department .. ?
Pounds in process, May 31: material 75% complete;
Conversion 25% complete .. 40,000
Cost data:
Work in process inventory, May 1:
Materials cost . $86,000
Conversion cost . $36,000
Cost added during May:
Materials cost . $447,000
Conversion cost . $198,000
The company uses the weighted-average method.
1. Compute the equivalent units of production.
2. Compute the costs per equivalent unit for the month.
3. Determine the cost of ending work in process inventory and of the units transferred out
to the next department.
4. Prepare a cost reconciliation report for the month.


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