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					Job 603					Job 604
Direct materials		$	1,500				$	3,100				$	2,600
Direct labor			900					1,540					2,200
Overhead			540					924					1,320

Job 602 was started in production in May, and these costs were assigned to it in May: direct materials, $500; direct labor, $250; and overhead, $150. 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?

What is the cost of the raw materials used in June for each of the three jobs and in total?

	Job 602 Job 603 Job 604 Total May costs June costs Total

How much total direct labor cost is incurred in June?

	Job 602 Job 603 Job 604 Total May costs June costs Total

What predetermined overhead rate is used in June?

	Predetermined overhead rate

How much cost is transferred to finished goods inventory in June?

	Job Raw Materials Direct Labor Overhead Applied Total Cost Cost transferred to finished goods Costs of Ending WIP 602 603 604 Total

Answer 1

• [1]

	Job 602	Job 603	Job 604	Total
May Costs	$500	$0	$0	$500
June costs	$1,000	$3,100	$2,600	$6,700
Total	$1,500	$3,100	$2,600	$7,200

• [2]

	Job 602	Job 603	Job 604	Total
May Costs	$250	$0	$0	$250
June costs	$650	$1,540	$2,200	$4,390
Total	$900	$1,540	$2,200	$4,640

• [3]

		Job 602	Job 603	Job 604
A	Overhead	$540	$924	$1,320
B	Direct Labor cost	$900	$1,540	$2,200
C = A/B	Predetermined overhead rate	60%	60%	60%

• [4]

Job	Raw Materials	Direct Labor	Overhead Applied	Total Cost	Cost transferred to finished goods	Cost of Ending WIP
602	$1,500	$900	$540	$2,940	$2,700	$240
603	$3,100	$1,540	$924	$5,564	$5,430	$134
604	$2,600	$2,200	$1,320	$6,120	$0	$6,120
Total	$7,200	$4,640	$2,784	$14,624	$8,130	$6,494