Question

In: Accounting

1. Kansas Company uses a job costing accounting system for its production costs. The company uses...

1. Kansas Company uses a job costing accounting system for its production costs. The company uses a predetermined overhead rate based on direct labor-hours to apply overhead to individual jobs. The company prepared an estimate of overhead costs at different volumes for the current year as follows:

Direct labor-hours 150,000 180,000 210,000
Variable overhead costs $ 900,000 $ 1,080,000 $ 1,260,000
Fixed overhead costs 666,000 666,000 666,000
Total overhead $ 1,566,000 $ 1,746,000 $ 1,926,000


The expected volume is 180,000 direct labor-hours for the entire year. The following information is for March, when Jobs 6023 and 6024 were completed:

Inventories, March 1
Materials and supplies $ 31,000
Work‐in‐process (Job 6023) $ 164,000
Finished goods $ 343,500
Purchases of materials and supplies
Materials $ 399,000
Supplies $ 44,000
Materials and supplies requisitioned for production
Job 6023 $ 135,000
Job 6024 112,500
Job 6025 71,500
Supplies 19,000
$ 338,000
Factory direct labor-hours (DLH)
Job 6023 12,000 DLH
Job 6024 9,000 DLH
Job 6025 6,500 DLH

  

Labor costs
Direct labor wages (all hours @ $9) $ 247,500
Indirect labor wages (11,000 hours) 52,800
Supervisory salaries 109,000
Building occupancy costs (heat, light, depreciation, etc.)
Factory facilities $ 20,000
Sales and administrative offices 7,000
Factory equipment costs
Power 11,000
Repairs and maintenance 5,000
Other 8,500
$ 24,500

  

(Note: Regardless of your answer to requirement a, assume that the predetermined overhead rate is $10 per direct labor-hour. Use this amount in answering requirements b through e.)

  

Required:

a. Compute the predetermined overhead rate (combined fixed and variable) to be used to apply overhead to individual jobs during the year. (Round your answer to 2 decimal places.)

b. Compute the total cost of Job 6023 when it is finished.

  

c. How much of factory overhead cost was applied to Job 6025 during March?

  

d. What total amount of overhead was applied to jobs during March?

  

e. Compute actual factory overhead incurred during March.

  

  

f. At the end of the year, Kansas Company had the following account balances:

  

Overapplied overhead $ 2,000
Cost of goods sold 2,910,000
Work-in-process inventory 104,000
Finished goods inventory 255,000

  

Assuming that the overapplied overhead is not material, show the new account balances in the following table.

      

Solutions

Expert Solution

Solution a:
Computation of Predetermined Overhead rate
Estimated Total overhead 1746000
/ Astimated Direct labor hours 180000
Predetermined overhead rate = estimated total overhead / Estimated direct labor hrs 9.7

.**Note: Regardless of your answer to requirement a, assume that the predetermined overhead rate is $10 per direct labor-hour. Use this amount in answering requirements b through e

Solution b:
Computation of Total Cost of Job 6023
Work in process, March 1 164000
Add: Materials requisitioned 135000
Add: Direct labor(12000*$9) 108000
Add: Overehead cost (12000*$10) 120000
Total cost of Job 6023 527000

.

Solution c:
Factory Overhead cost applied to Job 6025
Direct labor hours of Job 6025 6500
*Predetermined Overhead rate 10.00
Factory overhead cost applied to Job 6025 65000

.

.

Solution d:
Total overhead applied to Jobs during March
Total Direct labor hours (12000+9000+6500) 27500
*Predetermined Overhead rate 10.00
Factory overhead cost applied to jobs 275000

..

Solution e:
actual factory overhead incurred during March.
Indirect labor wages (11,000 hours) 52,800
Supervisory salaries 1,09,000
Building occupancy costs (heat, light, depreciation, etc.)
Factory facilities 20,000
Factory equipment costs
Power 11,000
Repairs and maintenance 5,000
Other 8,500
Supplies 19,000
Total actual overhead incurred 225300

..

f. At the end of the year, Kansas Company had the following account balances:

  

Overapplied overhead $ 2,000
Cost of goods sold 2,910,000
Work-in-process inventory 104,000
Finished goods inventory 255,000

  

Assuming that the overapplied overhead is not material, show the new account balances in the following table.

if the Overapplied overhead is immeterial it is only adjusted to cost of goods sold

The overhead applied is deducted from cost of goods sold

new balance of

Cost of goods sold = 2,910,000 - 2000 = 2908000

and remainig alance are ot change.

Cost of goods sold 2908000
Work-in-process inventory 104,000
Finished goods inventory 255,000

Journsl entry like:-

Overhaed control Dr 2000

Cost of goods sold CR 2000


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