Which costing system is used for custom products?

Which costing system is used for products that are indistinguishable from one another?

What journal entry is made when materials are purchased? (See entry a)

When a material requisition is created, moving materials into the factory, what journal entry is made? (See entry b)

What entry is made when labor charges are incurred in the factory for direct labor? (See entry c)

What entry is made when factory overhead costs are incurred, such as indirect materials, indirect labor, factory power costs, and factory depreciation? (See entry d)

Note that the actual factory overhead costs (described in question 8) are not charged directly to jobs. Instead, individual jobs are charged overhead based on the Predetermined Overhead Rate (abbreviated POR). How is the POR calculated?

There are several possibilities for the Estimated Activity Base used as the denominator of the POR. Suppose that Johnson Manufacturing estimates its Factory Overhead for 2013 to be $100,000 and estimated direct labor hours for 2013 are 20,000 direct labor hours. Calculate the Predetermined Overhead Rate per direct labor hour.

Suppose that Johnson Manufacturing uses 500 direct labor hours in manufacturing Job 295. What entry would be made to apply the factory overhead? (See entry e)

Suppose, instead, that Johnson Manufacturing chooses to allocate Factory Overhead on the basis of machine hours. If the estimated Factory Overhead for 2013 is $100,000 and estimated machine hours for 2013 are 25,000 machine hours, calculate the Predetermined Overhead Rate per machine hour.

Referring to question 11, if Johnson Manufacturing uses 300 machine hours in building Job 552, what entry would be made to apply the factory overhead? (See entry e)

Thinking about questions 9 and 11, a company has to make a choice as to which cost driver to use for applying the overhead. Under what circumstance might the company use direct labor hours? Under what circumstance might they use machine hours?

At the end of the year, a company compares the actual overhead with the overhead applied. Suppose that Johnson Companys Factory Overhead account appears as follows at the end of 2013: Factory Overhead

Actual	Applied
104,000	102,000

Was the factory overhead underapplied or overapplied? (Did they apply too little or too much?) What entry would be made to close the Factory Overhead account. (The word close means bring to a zero balance.) See the section on disposal of factory overhead balance in the text.

15. Suppose, on the other hand, that the status of the Factory Overhead account is as follows at the end of the year Factory Overhead

Actual	Applied
105,000	106,000

16. Was the factory overhead underapplied or overapplied? 17. What entry would be made to close the Factory Overhead account? 18. What entry is made when the goods get finished? (See entry g) 19.What two entries are made when goods get sold? (See entries h and i) 20.If period costs, such as office salaries and sales salaries are incurred, how would they be recorded? (See entry j) 21.If a job order costing system is used for a professional service business, would a finished goods account be used? 22. Are there any questions you had difficulties with? Be sure to post them on the discussion board.