Question

In: Accounting

Johnson Company applies overhead to products using direct labor hours as the activity level. During 2019,...

Johnson Company applies overhead to products using direct labor hours
as the activity level. During 2019, Johnson Company had the following
estimated costs:

Direct materials .................... $278,000
Direct labor ........................  255,000 (15,000 hours expected)
Advertising .........................   37,000
Rent on factory building ............   38,000
Depreciation .................... ...   60,000
Indirect materials ..................   20,000
Sales commissions ...................   40,000
Production supervisor's salary ......   50,000
Insurance on factory equipment ......   18,000
CEO's salary ........................   95,000

The following additional information is available:

1. 30% of the depreciation relates to equipment in the administrative
   offices while 70% of the depreciation relates to equipment in the
   factory.

2. Direct laborers are paid $17 per hour.

During 2019, Johnson Company began work on three jobs. Information
relating to these three jobs appears below:

                                  Job #359      Job #360      Job #361
direct materials ..............    $98,000       $75,000       $91,000
direct labor hours ............      4,700         6,000         5,800

By the end of 2019, job #360 and job #361 had been completed. Job #359
was not completed by the end of 2019. Additionally, by the end of 2019,
job #360 had been sold while job #361 was not sold. Johnson Company had
total actual overhead cost of $193,000 during 2019.

Calculate the cost of goods sold reported by Johnson Company for 2019
after the overhead variance has been closed.

Solutions

Expert Solution

The cost of Goods sold reported by Johnson company for 2019 is $257,150.(Actual) as Job No360 is finished and sold by end of 2019. here the company allocating overhead based on labour hours.

Please find the below calculation.

job 359 job 360 Job 361 Total
Work In prgress Cost of Goods Sold Finished Goods
direct material 98000 75000 91000 264000
direct labour 4700@17 79900 DL 600o*17 102000 DL 5800*17 98600 280500
Total Cost Material & labour                1,77,900                   -                         1,77,000                   -                  1,89,600 544500
Overhead Allocation 47040 69480 58800
Total Cost                2,24940                       2,46480                2,48400 7,37,500
Allocation according to labour hours 28% 36% 35% 100%
labor hours                      4,700                             6,000                      5,800      16,500
APPLIED OVERHEAD
details Total Overhead Factory Overhead Applied ACTUAL OH VARIANE
Rent Factory 38000 38000
Depreciation 60000 42000
Ind.Material 20000 20000
Production Supervisors salary 50000 50000
Insurance on factory equipment 18000 18000
186000                                      1,68,000 1,93,000      25,000
COGS ALLOCATION 36% of Applied with 36%of allocation of variance                                          60,480         9,000      69,480
35% of Applied cost                                          58,800      58,800
28% of Applied Cost                                          47,040      47,040
total 1,75,320

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