In: Accounting
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?
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 |