Job order costing
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Birmingham Bowling Ball Company (BBBC) uses a job-order costing system to accumulate manufacturing costs. The companyâ??s work-in-process on December 31, 20x3, consisted of one job (no. 3088), which was carried on the year-end balance sheet at $78,400. There was no finished-goods inventory on this date. BBBC applies manufacturing overhead to production on the basis of direct-labor cost. Budgeted
totals for 20x4 for direct labor and manufacturing overhead are $2,100,000 and $2,730,000, respectively. Actual results for the year follow.
Direct material used ................................................................. $2,800,000
Direct labor ............................................................................. 2,175,000
Indirect material used ................................................................. 32,500
Indirect labor ............................................................................ 1,430,000
Factory depreciation ................................................................... 870,000
Factory insurance ............................................................................. 29,500
Factory utilities .......................................................................... 415,000
Selling and administrative expenses ............................................. 1,080,000
Total ................................................................................ $8,832,000
Job no. 3088 was completed in January 20x4; there was no work in process at year-end. All jobs produced
during 20x4 were sold with the exception of job no. 3154, which contained direct-material costs of $78,000 and direct-labor charges of $42,500. BBBC charges any under- or overapplied overhead to Cost of Goods Sold.
1. Determine the companyâ??s predetermined overhead application rate.
2. Determine the additions to the Work-in-Process Inventory account for direct material used, direct
labor, and manufacturing overhead.
3. Compute the amount BBBC would disclose as finished-goods inventory on the December 31,
20x4, balance sheet.
4. Prepare the journal entry needed to record the yearâ??s completed production.
5. Compute the amount of under- or overapplied overhead at year-end, and prepare the necessary
journal entry to record its disposition.
6. Determine BBBCâ??s 20x4 cost of goods sold.
7. Would it be appropriate to include selling and administrative expenses in either manufacturing
overhead or cost of goods sold? Briefly explain.
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