Question

Job Costs Using a Plantwide Overhead Rate

Naranjo Company designs industrial prototypes for outside companies. Budgeted overhead for the year was $455,000, and budgeted direct labor hours were 26,000. The average wage rate for direct labor is expected to be $35 per hour. During June, Naranjo Company worked on four jobs. Data relating to these four jobs follow:

	Job 39	Job 40	Job 41	Job 42
Beginning balance	$23,600	$32,400	$18,400	$900
Materials requisitioned	18,600	21,800	12,800	14,600
Direct labor cost	9,700	18,900	7,450	5,500

Overhead is assigned as a percentage of direct labor cost. During June, Jobs 39 and 40 were completed; Job 39 was sold at 125 percent of cost. (Naranjo had originally developed Job 40 to order for a customer; however, that customer was near bankruptcy and the chance of Naranjo being paid was growing dimmer. Naranjo decided to hold Job 40 in inventory while the customer worked out its financial difficulties. Job 40 is the only job in Finished Goods Inventory.) Jobs 41 and 42 remain unfinished at the end of the month.

Required:

1. Calculate the balance in Work in Process as of June 30.

$

2. Calculate the balance in Finished Goods as of June 30.

$

3. Calculate the cost of goods sold for June.

$

4. Calculate the price charged for Job 39. Round your answer to the nearest cent.

$

5. What if the customer for Job 40 was able to pay for the job by June 30? What would happen to the balance in Finished Goods?

What would happen to the balance of Cost of Goods Sold?

Answer 1

Job Cost sheet
		Job No. 39	Job No.40	Job No. 41	Job No 42
Beginning cost		23600	32,400	18400	900
Add: Current cost
Material		18600	21,800	12800	14600
labour		9700	18,900	7450	5500
Overheads		4850	9450	3725	2750
Total cost		56750	82,550	42375	23750
Status		Sold	FG	WIP	WIP
Note: OH rate based on DLC:
Overheads budgeted			455000
Divide: Direct labour cost
Labour hours		26000
Labour rate		35	910000
OH rate			50% of DLC
Req 1.
WIP balance:
Job 41	42375
Job 42	23750
Total	66125
Req 2.
FG balance (Job 40)		82550
Req 3.
Cost of goods sold (Job 39)			56,750.00
Req 4.
Price charged for Job 39:
Cost of Job			$56,750
Add: Markup 25%of cost			$14,187.50
Selling price of Job 39			$70,938
Req 5.
If Job 40 is sold off, then:
FG balance		Nil
COGS:
Job 39		56750
Job 40		82550
Total COGS		139300