Question

Company has the following information relating to its manufacturing during February:

• Beginning Raw Materials Inventory was $1,800. Purchases were $21,000.
• Budgeted Overhead is $30,000. Overhead is allocated using machine hours.   Budgeted machine hours are 1,500 machine hours. Actual overhead was $32,000.
• Job #2 was unfinished on January 31^st. The total cost of the job was $4,000.
• Jobs #3-5 were started in February, while Job #2 was continued to be manufactured. Data related to jobs in manufacturing during February are as follows:

Job #                   DM                  DL                Machine Hours

   2                   $1,000             $ 700                          120

   3 2,000 800                          240

   4 3,000 1,200                          360

   5 5,000 1,400                          480

• Job #1, costing $12,000, was finished in January but not sold during that month.
• Jobs #1, 2, and 4 were sold during February.
• Job #3 was unfinished at the end of February and Job #5 was finished but not sold.
• ABC Company’s fiscal year ends on December 31^st.
• Over/underapplied overhead is closed out at the end of each fiscal quarter.

1. Calculate the February Ending Balance of Work In Process.
2. Calculate the February Cost of Goods Manufactured showing detail BY JOB!
3. Calculate the February Ending Balance of Finished Goods showing detail BY JOB!
4. Calculate the February Balance in Factory Overhead.

Answer 1

Predetermined overhead rate = Estimated manufacturing overhead / Estimated machine hours

Predetermined overhead rate = $30,000 / 1,500 = $20 per machine hour

1.

Ending work in process: (Job 3)

	Job 3
Direct material	$2,000
Direct labor	800
Applied overhead (240*$20)	4,800
Total cost	$7,600

2.

Cost of goods manufactured:

	Job 2	Job 3	Job 4	Job 5	Total
Beginning work in process	$4,000				$4,000
Direct material	1,000	2,000	3,000	5,000	11,000
Direct labor	700	800	1,200	1,400	4,100
Applied overhead	2,400 (120*$20)	4,800 (240*$20)	7,200 (360*$20)	9,600 (480*$20)	24,000
Total cost	$8,100	$7,600	$11,400	$16,000	$43,100

Cost of goods manufactured:

Beginning work in process: Job 2		$4,000
Total manufacturing cost:
Job 2 (1,000+700+2,400)	$4,100
Job 3	7,600
Job 4	11,400
Job 5	16,000
		39,100
Ending work in process Job 3		(7,600)
Cost of goods manufactured		$35,500

3.

Ending finished goods balance: (Job 5)

	Job 5
Direct material	$5,000
Direct labor	1,400
Applied overhead (480*$20)	9,600
Total cost	$16,000

4.

Balance in factory overhead = Actual overhead - Applied overhead

Balance in factory overhead = $32,000 - 24,000

Balance in factory overhead = $8,000 Underapplied