Question

Johnson Company uses a job-order costing system and started the month of
March with three jobs in process. The cost of beginning work in process
plus the costs added during March are shown below:

                                   Job #1        Job #2        Job #3
beginning work in process .....    $4,930        $4,970        $2,840

COSTS ADDED DURING MARCH:
direct materials ..............    $3,400        $4,200        $4,600
direct labor ..................    $5,000        $4,000           ?

Johnson applies overhead to jobs based on a percentage of direct materials
used. During March, Johnson completed both Job #2 and Job #3. Job #1 was
not completed by the end of March. Job #2 consisted of 1,700 units; some
of these units were sold during March. None of the units from Job #3 were
sold in March. Johnson Company's accounting records for March disclosed
the following information:

Work in process inventory balance at March 31 ..........  $15,880
Actual overhead cost for the month of March ............  $ 8,500
Cost of goods sold for March ...........................  $11,830
Finished goods inventory balance at March 31 ...........  $18,870

The cost of goods sold number above represents the cost of goods sold for
March after the overhead variance has been closed for March.

Calculate the number of units from Job #2 that were sold during March.
Simply enter your answer as a number. Do not type the word units after
your answer.

Answer 1

Step 1. Calculation of % of overhead based on material with the help of job 1.

Since only the job 1 is pending at the end of month hence cost shown as work in process on March 31 will consist of only job 1.

So cost of job 1 = $15880

Opening WIP + Material added + labor added + overhead = $15880

$4930 + $3400 + $5000 + overhead = $15880

Overhead = $15880 - $13330 = $2550

Overhead % based on material = $2550/$3400*100 = 75%

Step 2. Calculation of total applied overhead

Total material in all three jobs = $3400 + $4200 + $4600

= $12200

Total overhead applied = $12200 * 75%

= $9150

Step 3 calculation of variation in overhead

Variation = Actual - applied

= $8500 - $9150

= $650 overapplied

Step 4 calculation of cost of goods sold without adjusting variable

= $11830 + $650

= $12480

Step 5 calculation of cost per unit of job 2

Cost of job 2 = $4970 + $4200 + $4000 + ($4200*75%)

= $16320

Units of job 2 = $1700

Cost per unit = $16320/1700 = $9.60 per unit

Step 6 calculation of units sold

= Cost of goods sold without variation / cost per unit

= $12480/9.6

= 1300 units