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Part B: Application of Job Order Costing
Scanlon Company has a job-order costing system and applies to manufacture overhead cost to products
on the basis of machine-hours. The following estimates were used in preparing the
predetermined overhead rate for the most recent year:
Machine-hours ............................... 95,000
Manufacturing overhead cost ........ $1,710,000
During the most recent year, a severe recession in the company’s industry caused a
buildup of inventory in the company’s warehouses. The company’s cost records revealed
the following actual cost and operating data for the year:
Machine-hours ............................................................................. 75,000
Manufacturing overhead cost ...................................................... $1,687,500
Amount of applied overhead in inventories at year-end:
Work in process ........................................................................ $337,500
Finished goods .......................................................................... $253,125
Amount of applied overhead in cost of goods sold .................. $759,375
Required:
a. Compute the company's predetermined overhead rate for the year and the amount of
underapplied or overapplied overhead for the year.
b. Determine the difference between net operating income for the year if the underapplied or
overapplied overhead is allocated to the appropriate accounts rather than closed directly to
Cost of Goods Sold.
Part C: Process Costing using Weighted Average
Timberline Associates uses the weighted-average method in its process costing system. The following
data are for the first processing department for a recent month:
Work in process, beginning:
Units in process ........................................................ 2,400
Percent complete with respect to materials .............. 75%
Percent complete with respect to conversion ........... 50%
Costs in the beginning inventory:
Materials cost ........................................................... $8,400
Conversion cost ........................................................ $7,200
Units started into production during the month ........... 20,800
Units completed and transferred out ........................... 22,200
Costs added to production during the month:
Materials cost ........................................................... $97,400
Conversion cost ........................................................ $129,600
Work in process, ending:
Units in process ........................................................ 1,000
Percent complete with respect to materials .............. 80%
Percent complete with respect to conversion ........... 60%
Required:
a. Determine the equivalent units of production.
b. Determine the costs per equivalent unit.
c. Determine the cost of ending work in process inventory.
d. Determine the cost of the units transferred to the next department.

Answer 1

Machine hours	95000
Mfg overhead costs	1710000
Overhead rate	18.00
Actual cost and operating data
Machine-hours	75,000
Manufacturing overhead cost	16,87,500
WIP	3,37,500
Finished goods	2,53,125
Cost of goods sold	7,59,375
	13,50,000
a) Predeterminde overhead rate	i.e. 1710000/95000
	18.00
Under applied overhead= actual - applied	3,37,500
b) The net operatin income wilud be reduced by 3,37500
a) Equivalent units of production		Units	Material cost	Conversion
	Transferred out (A)	22,200	22,200	22,200
	Units at end (B)	1,000	1,000	1,000
	% of completion (C)	100%	80%	60%
	Equivalent units at end (D=B×C)	1,000	800	600
	Total equivalent units (A+D)	23,200	23,000	22,800
b) Cost per equivalent unit
		Material cost	Conversion cost	Total cost
	At beginning	8,400	7,200	15,600
	Added during	97,400	1,29,600	2,27,000
	Cost	1,05,800	1,36,800	2,42,600
	Total equivalent units	23,000	22,800	22,200
	Equivalent cost per unit	4.60	6.00	10.60
c) Cost of WIP at end
		Material cost	Conversion cost	Total
	Units at end (A)	1000	1000	1000
	Cost per equivalent unit (B)	4.60	6.00	10.60
	% of completion (C)	80%	60%
	Total Cost (A*B*C)	3,680	3,600	7,280