Question

Reed Incorporated uses a job-order costing system and a predetermined overhead rate based on machine hours.

At the beginning of the year, the company estimated manufacturing overhead for the year would be $240,000 and estimated machine hours would be 10,000.

The following information pertains to December of the current year:

		Job 10	Job 11	Job 12	Total
Work-in-process, Dec. 1		$16,000	$26,000	$38,000	$80,000
December production activity:
	Materials requisitioned	$ 4,000	$ 4,800	$ 7,200	$16,000
	Direct labor cost	$ 2,400	$ 3,600	$ 4,000	$10,000
	Machine hours	400 hrs.	700 hrs.	900 hrs.	2000
	Labor hours	120 hrs.	180 hrs.	200 hrs.	500

Actual manufacturing overhead cost incurred in December was $61,000.

Assuming Job 12 is the only job completed what is the cost assigned to ending work in process? Please show all computations.

Answer 1

		predetermined overhead rate
		240,000/10000
		24	per machiner hrs
		overhead applied =		24* mhrs actual
				Job 10	Job11	Job12	Total
	Work in process ,Dec 1			16,000	26,000	38,000	80,000
	December activity
	Direct materials			4,000	4,800	7,200	16,000
	direct labor			2,400	3,600	4,000	10,000
	overhead applied			9600	16800	21600	48000
	total cost added in dec			16,000	25,200	32,800	74,000
	total cost of job			32,000	51,200	70,800	154,000
				WIP	WIP	finished goods
	Cost assigned to Work in process inventory
	32,000+51,200
	83200	answer