In: Accounting
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.
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 |