Question

Exercise 5.12 (Algorithmic) Predetermined Overhead Rate, Application of Overhead to Jobs, Job Cost On April 1, Sangvikar Company had the following balances in its inventory accounts: Materials Inventory $12,820 Work-in-Process Inventory 21,380 Finished Goods Inventory 8,710 Work-in-process inventory is made up of three jobs with the following costs: Job 114 Job 115 Job 116 Direct materials $2,436 $2,695 $5,058 Direct labor 1,780 1,420 4,020 Applied overhead 979 781 2,211 During April, Sangvikar experienced the transactions listed below. Materials purchased on account, $29,300. Materials requisitioned: Job 114, $16,720; Job 115, $11,750; and Job 116, $5,280. Job tickets were collected and summarized: Job 114, 130 hours at $12 per hour; Job 115, 230 hours at $15 per hour; and Job 116, 90 hours at $19 per hour. Overhead is applied on the basis of direct labor cost. Actual overhead was $4,590. Job 115 was completed and transferred to the finished goods warehouse. Job 115 was shipped, and the customer was billed for 125 percent of the cost. Required: 1. Calculate the predetermined overhead rate based on direct labor cost. 55 % of direct labor cost 2. Calculate the ending balance for each job as of April 30. When required, round your answers to the nearest dollar. Use your rounded answers in subsequent computations, if necessary. Ending Balance Job 114 $ Job 115 $ Job 116 $ 3. Calculate the ending balance of Work in Process as of April 30. When required, round your answer to the nearest dollar. $ 4. Calculate the cost of goods sold for April. When required, round your answer to the nearest dollar. $ 5. Assuming that Sangvikar prices its jobs at cost plus 25 percent, calculate the price of the one job that was sold during April. Round to the nearest dollar. $

Answer 1

1	Pre-determined overhead based on direct labor cost
	Let's use the applied overhead and direct labor in the beginning WIP
	You can use any job for this purpose
	I have considered Job 114 here
	Predetermined overhead rate=Applied overhead/Direct labor cost=979/1780=0.55=55% of direct labor cost
2					Job 114	Job 115	Job 116
	Beg. Balance
	Direct materials				2436	2695	5058
	Direct labor				1780	1420	4020
	Applied overhead				979	781	2211
	During April:
	Direct materials				16720	11750	5280
	Direct labor				1560	3450	1710
					(130*12)	(230*15)	(90*19)
	Applied overhead				858	1898	941
	(Direct labor cost*55%)				(1560*55%)	(3450*55%)	(1710*55%)
	Total				24333	21994	19220
3	Ending balance of work in process= Cost of jobs not completed=Cost of Job 114+Cost of Job 116=24333+19220=$ 43553
4	Cost of goods sold=Cost of job sold=cost of Job 115=$ 21994
5	Price of one job=Cost of goods sold+25%=21994+(21994*25%)=27492.5=$ 27493
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