Question

Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. It started only two jobs during March—Job P and Job Q. Job P was completed and sold by the end of March and Job Q was incomplete at the end of March. The company uses a plantwide predetermined overhead rate based on direct labor-hours. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):

            
Estimated total fixed manufacturing overhead   $   12,500     
Estimated variable manufacturing overhead per direct labor-hour   $   1.50     
Estimated total direct labor-hours to be worked      2,500     
Total actual manufacturing overhead costs incurred   $   16,500     

 

    Job P   Job Q
Direct materials   $   16,500      $   8,500     
Direct labor cost   $   25,600      $   12,000     
Actual direct labor-hours worked      1,600         750     

1. Required information
Required:

1. What is the company’s predetermined overhead rate? (Round your answer to 2 decimal places.)

.

2. Required information
2. How much manufacturing overhead was applied to Job P and Job Q?

 

3. Required information
3. What is the direct labor hourly wage rate?

4. Required information
4. If Job P includes 30 units, what is its unit product cost?

.

5. Required information
5 What is the total amount of manufacturing cost assigned to Job Q as of the end of March (including applied overhead)?

6. Required information
6. What is the amount of underapplied or overapplied overhead?

 

7. Required information
7. Will your answer to question 6 increase or decrease unadjusted cost of goods sold?

   Decrease
   Increase

8. Required information
8. If Sweeten Company requisitioned $27,900 from raw materials inventory during March, then how much indirect materials cost would be included in Manufacturing Overhead Incurred?

9. Required information
9. If Sweeten Company’s labor time tickets totaled $42,000 for the month of March, then how much indirect labor cost would be included in Manufacturing Overhead Incurred?

 

Answer 1

1.

Predetermined overhead rate = Estimated total manufacturing overhead / Estimated direct labor hours

Predetermined overhead rate = $12,500+3,750 (2,500*$1.50) / 2,500 = $6.5 per direct labor hours

2.

Manufacturing overhead applied:

Job P = 1,600*$6.5 = $10,400

Job Q = 750*$6.5 = $4,875

3.

Direct labor hourly wage rate = $25,600 / 1,600 = $16 per direct labor hour

4.

	Job P
Direct material	$16,500
Direct labor	25,600
Manufacturing overhead (1,600*$6.5)	10,400
Total costs	52,500
Units produced	30
Unit product costs	$1,750

5.

	Job Q
Direct material	$8,500
Direct labor	12,000
Manufacturing overhead (750*$6.5)	4,875
Total costs	$25,375

6.

Amount of underapplied or overapplied overhead = Actual manufacturing overhead - Applied manufacturing overhead

Amount of underapplied or overapplied overhead = $16,500 - $15,275 (10,400+4,875)

Underapplied overhead = $1,225

7.

Increase

8.

Indirect material costs = $27,900 - $25,000(16,500+8,500) = $2,900

9.

Indirect labor = $42,000 - $37,600 (25,600+12,000) = $4,400