Question

X Corporation, which uses a normal job costing system and dispose the over/under applied manufacturing overhead using write-off method, had two jobs in process at the start of 20x2: Job No. 59, WIP Balance$66,500Job No. 60, WIP Balance$139,500X applies manufacturing overhead on the basis of machine hours.At the beginning of the 20x2, X corporation estimated its manufacturing overhead during the first quarter would total $231,250and its budgeted machine hours would total 6250Manufacturing overhead incurred during the first quarter of 20x2 included following charges:Depreciation $20,000Indirect labor 50000Indirect materials used 4000Other factory costs128700The company worked on three jobs during the first quarter. Costs added during the first quarter were as follows:Job No.Direct MaterialDirect LaborMachine Hours59$18,000$45,000150060025,00010006137,00035,000?The manufacturing overhead account showed that overhead was overapplied by $34,100Job no. 59 and 60 were completed during the quarter, and X sold job no. 59 for $218,000.00Round your answers to the nearest dollar. Fill in the blank without $ or comma or period, e.g., 12345

How many machine hours were used by Job no. 61?

What was the gross margin of Job no. 59 after the adjustment of overapplied manufacturing overhead?

Answer 1

1. Predetermined overhead rate = Estimated manufacturing overhead / Budgeted machine hours

= 231,250 / 6,250 = $37 / hour

Actual overhead :

Depreciation...........................20,000

Indirect labor..........................50,000

Indirect materials used..........4,000

Other factory cost.................128,700

Total.......................................$202,700

As given in question overhead was overapplied by $34,100

So total applied overhead( 34,100 + 202,700) = 236,800

Need to find out machine houur of job no. 61

Assume machine hours taken by job 61 is X

236,800 = ( 1,500 + 1,000 + X ) * 37

6,400 = 2,500 + X

X = 6,400 - 2,500 = 3,900

So total hours taken by job 61 is 3,900 macine hours

Actual overhead rate ( 202,700 / ( 1,500 + 1,000 + 3,900) = $31.67 / hour

2. Cost of goods sold ( job. 59)

WIP opening balance.................................................66,500

Direct materials..........................................................18,000

Direct labor................................................................45,000

Applied overhead...............( 1500 * 37).....................55,500

( Machine hours * PDOH rate)

Overapplied overhead.......( 1500 * 31.67 - 37)........(7,995)

= Total.....................................................................$177,005

Gross margin of job no 59 = Sales revenue - Cost of goods sold = 218,000 - 177,005 = $40,995