Question

The computer workstation furniture manufacturing that Santana Rey started in January is progressing well. As of the end of June, Business Solutions's job cost sheets show the following total costs accumulated on three furniture jobs.

Job 602: Direct Materials: $1400, direct labor $1,000, Overhead $500

Job 603: Direct Materials: $3,600, direct labor $1,400, Overhead $700

Join 604: Direct Materials: $3,200, direct labor $2,200, Overhead $1,100

Job 602 was started in production in May, and these costs were assigned to it in May: direct materials, $600; direct labor, $250; and overhead, $125. Jobs 603 and 604 were started in June. Overhead cost is applied with a predetermined rate based on direct labor costs. Jobs 602 and 603 are finished in June, and Job 604 is expected to be finished in July. No raw materials are used indirectly in June. (Assume this company’s predetermined overhead rate did not change over these months.)
Required:
1. What is the cost of the raw materials used in June for each of the three jobs and in total?
2. How much total direct labor cost is incurred in June?
3. What predetermined overhead rate is used in June?
4. How much cost is transferred to finished goods inventory in June?

ob 604 Direct materials $ 1,400 $ 3,600 $ 3,200 Direct labor 1,000 1,400 2,200 Overhead 500 700 1,100 Job 602 was started in production in May, and these costs were assigned to it in May: direct materials, $600; direct labor, $250; and overhead, $125. Jobs 603 and 604 were started in June. Overhead cost is applied with a predetermined rate based on direct labor costs. Jobs 602 and 603 are finished in June, and Job 604 is expected to be finished in July. No raw materials are used indirectly in June. (Assume this company’s predetermined overhead rate did not change over these months.) Required: 1. What is the cost of the raw materials used in June for each of the three jobs and in total? 2. How much total direct labor cost is incurred in June? 3. What predetermined overhead rate is used in June? 4. How much cost is transferred to finished goods inventory in June?

Answer 1

Solution:

Solution 1 and 2:
Direct Materials
Job	May	June	Total
602	$600	$800	$1,400
603		$3,600	$3,600
604		$3,200	$3,200
Total	$600	$7,600	$8,200
Direct Labor
Job	May	June	Total
102	$250	$750	$1,000
103		$1,400	$1,400
104		$2,200	$2,200
Total	$250	$4,350	$4,600

Solution 3:

Overhead Rate
Choose Numerator	/	Choose Denominator	=	Overhead Rate
Job 102
Overhead Applied	/	Direct Labor Cost	=	Overhead Rate
$500	/	$1,000	=	50%
Job 103
Overhead Applied	/	Direct Labor Cost	=	Overhead Rate
$700	/	$1,400	=	50%
Job 104
Overhead Applied	/	Direct Labor Cost	=	Overhead Rate
$1,100	/	$2,200	=	50%

Solution 4:

Job	Direct Material	Direct Labor	Applied Overhead	Total Cost	Cost Transferred to finished goods
102	$1,400	$1,000	$490	$2,890	$2,890
103	$3,600	$1,400	$686	$5,686	$5,686
104	$3,200	$2,200	$1,078	$6,478	$0
Total	$8,200	$4,600	$2,254	$15,054	$8,576