Question

Predetermined Overhead Rate, Application of Overhead to Jobs, Job Cost

On April 1, Sangvikar Company had the following balances in its inventory accounts:

Materials Inventory $12,790

Work-in-Process Inventory 21,150

Finished Goods Inventory 8,840

Work-in-process inventory is made up of three jobs with the following costs:

Job 114 Job 115 Job 116

Direct materials $2,390   $2,698 $3,870

Direct labor 1,740 1,540 4,340

Applied overhead 1,044 924 2,604

During April, Sangvikar experienced the transactions listed below.

a. Materials purchased on account, $28,850.

b. Materials requisitioned: Job 114, $16,670; Job 115, $12,180; and Job 116, $5,210.

c. Job tickets were collected and summarized: Job 114, 150 hours at $11 per hour; Job 115, 210 hours at $14 per hour; and Job 116, 80 hours at $17 per hour.

d. Overhead is applied on the basis of direct labor cost.

e. Actual overhead was $4,625.

f. Job 115 was completed and transferred to the finished goods warehouse.

g. Job 115 was shipped, and the customer was billed for 125 percent of the cost.

Required:

1. Calculate the predetermined overhead rate based on direct labor cost  of direct labor cost

2. Calculate the ending balance for each job as of April 30. When required, round your answers to the nearest dollar. Use your rounded answers in subsequent computations, if necessary.

Job 114:

Job 115:

Job 116:

3. Calculate the ending balance of Work in Process as of April 30. When required, round your answer to the nearest dollar.

4. Calculate the cost of goods sold for April. When required, round your answer to the nearest dollar.

5. Assuming that Sangvikar prices its jobs at cost plus 25 percent, calculate the price of the one job that was sold during April. When required, round your answer to the nearest dollar.

Answer 1

1	Predetermined overhead rate=Applied overhead/Direct labor
	Consider any job in the beginning work in process inventory for this purpose
	Let's take Job 114
	Predetermined overhead rate=1044/1740=$ 0.6 per direct labor cost
2					Job 114	Job 115	Job 116
	Beginning balance:
	Direct materials				2390	2698	3870
	Direct labor				1740	1540	4340
	Applied overhead				1044	924	2604
	Current year:
	Direct materials				16670	12180	5210
	Direct labor			a	1650	2940	1360
					(150*11)	(210*14)	(80*17)
	Applied overhead			b=a*0.6	990	1764	816
	Total cost (Ending balance)				24484	22046	18200
3	Ending balance of work in process=Ending balances of jobs not completed=Ending balances of Job 114 and 116=24484+18200=$ 42864
4	Cost of goods sold=Ending balance of job sold=Ending balance of Job 115=$ 22046
5	Price of Job sold=Cost+25%=Cost*125%=22046*125%=22557.5=$ 22558
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