Question

As of the end of June, the job cost sheets at Racing Wheels, Inc., show the following total costs accumulated on three custom jobs.

	Job 102			Job 103			Job 104
Direct materials	$	44,000		$	54,000		$	49,000
Direct labor		16,000			29,100			44,000
Overhead applied		5,440			9,894			14,960

Job 102 was started in production in May, and the following costs were assigned to it in May: direct materials, $10,000; direct labor, $3,300; and overhead, $1,122. Jobs 103 and 104 were started in June. Overhead cost is applied with a predetermined rate based on direct labor cost. Jobs 102 and 103 were finished in June, and Job 104 is expected to be finished in July. No raw materials were used indirectly in June. Using this information, answer the following questions. (Assume this company’s predetermined overhead rate did not change across these months.)

1&2. Complete the table below to calculate the cost of the raw materials requisitioned and direct labor cost incurred during June for each of the three jobs?
3. Using the accumulated costs of the jobs, what predetermined overhead rate is used?
4. How much total cost is transferred to finished goods during June?

Answer 1

Solution 1 and 2:
Direct Materials
Job	May	June	Total
102	$10,000	$34,000	$44,000
103		$54,000	$54,000
104		$49,000	$49,000
Total	$10,000	$1,37,000	$1,47,000
Direct Labor
Job	May	June	Total
102	$3,300	$12,700	$16,000
103		$29,100	$29,100
104		$44,000	$44,000
Total	$3,300	$85,800	$89,100

Solution 3:
Overhead Rate
Choose Numerator	/	Choose Denominator	=	Overhead Rate
Job 102
Overhead Applied	/	Direct Labor Cost	=	Overhead Rate
$5,440	/	$16,000	=	34%
Job 103
Overhead Applied	/	Direct Labor Cost	=	Overhead Rate
$9,894	/	$29,100	=	34%
Job 104
Overhead Applied	/	Direct Labor Cost	=	Overhead Rate
$14,960	/	$44,000	=	34%

Solution 4:
Job	Direct Material	Direct Labor	Applied Overhead	Total Cost	Cost Transferred to finished goods
102	$44,000	$16,000	$5,440	$65,440	$65,440
103	$54,000	$29,100	$9,894	$92,994	$92,994
104	$49,000	$44,000	$14,960	$1,07,960	$0
Total	$1,47,000	$89,100	$30,294	$2,66,394	$1,58,434