Question

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.

Answer 1

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