Question

Haughton Company uses a job costing system for its production costs and a predetermined factory overhead rate based on direct labor costs to apply factory overhead to all jobs. During the month of July, the firm processed three jobs: X13, X14, and X15, of which X13 was started in June.

Account			July 1	July 31
Iventories
Direct Materials			38,300	?
Work - In - Process			44600	?
Finished Goods			0	0
COGS			?
Direct Materials Purchased in July			73,000
Materials issued to production:
X13			18,540
X14			38,620
X15			14,900
Factory Labor Hours used ( 30$/Hour)
X13			4,400
X14			3,700
X15			2,500
Indirect Labor			7800
Other Factory OH Cost Incurred
Rent			140,500
Utilities			996,000
Repairs and Maintenace			197,500
Depreciation			140,100
Other			65,000

As of July 31, Job X13 was sold and Jobs X14 and X15 were still in process.

Total factory overhead applied in July was $1,780,800.

Required:

1. Compute the predetermined factory overhead rate.

2. Compute the amount of the Direct Materials account at the end of July.

3. Compute the actual factory overhead cost incurred during the month of July.

4. Compute the ending balance of the Work-in-Process Inventory account for July.

5. Prepare the Statement of Cost of Goods Manufactured for July.

6. Compute the amount of overapplied or underapplied overhead.

7. What is the cost per unit of Job X13 if it has a total of 100 units?

8. Prepare the Statement of Cost of Goods Sold for July.

Answer 1

1. Compute the predetermined factory overhead rate.

Factory Labor Hours used
X13	4400
X14	3700
X15	2500
Total Hour Used	10600
Total Direct labor Cost 10600*30	318000

Predetermined factory overhead rate =1,780,800/318000=$5.60 per Direct labor Cost or 560 % of direct labor Cost

2. Compute the amount of the Direct Materials account at the end of July.

Direct Materials Beginning	38300
Add Direct Materials Purchased in July	73,000
Less Materials issued to production:	72060
Direct Materials account at the end of July	39,240

3. Compute the actual factory overhead cost incurred during the month of July.

Indirect Labor	234000
Rent	1,40,500
Utilities	9,96,000
Repairs and Maintenace	1,97,500
Depreciation	1,40,100
Other	65,000
Actual factory overhead cost incurred during the month of July	1773100

4. Compute the ending balance of the Work-in-Process Inventory account for July.

	X13	X14	X15	Total
Begiining Wip	44,600			44,600
Direct Material	18,540	38,620	14900	72,060
Direct Labor	132000	111000	75000	3,18,000
Overhead	739200	621600	420000	17,80,800
total Cost	9,34,340	7,71,220	5,09,900	22,15,460
		In Process	In Process

balance of the Work-in-Process Inventory =771220+509900=$1281120

5. Prepare the Statement of Cost of Goods Manufactured for July.

Statement of Cost of goods Manufactured
Direct material Used	72,060
Direct Labor	3,18,000
Factory Overhead	17,80,800
Total Manufacturing cost	21,70,860
Add WIP beginning	44,600
Less Ending WIP	12,81,120
Cost of goods Manufactured	9,34,340

6. Compute the amount of overapplied or underapplied overhead.

1,780,800-1773100=$7700 overapplied

7. What is the cost per unit of Job X13 if it has a total of 100 units?

=

9,34,340/100 =$9343.40

8. Prepare the Statement of Cost of Goods Sold for July.

Statement of Cost of goods sold
Cost of goods Manufactured	9,34,340
Add beginning Finshed Goods	0
Less Ending Finshed goods	0
Cost of goods sold	9,34,340