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 Johnson's cost of goods manufactured for March

Answer 1

Cost of goods manufactured for March : $ 31,350

Work in Process Inventory
Beginning balance	$ 12,740	Cost of Goods Manufactured	$ 31,350
Direct Materials	12,200
Direct Labor	13,140
Manufacturing Overhead	9,150
Ending Balance	15,880

Finished Goods Inventory
Beginning balance	$ 0	Cost of Goods Sold ( unadjusted )	$ 12,480
Cost of Goods Manufactured	31,350
Ending balance	18,870

As on March 31, Job # 1 is still unfinished. Therefore the ending work in process balance of $ 15,880 pertains to Job # 1.

Manufacturing overhead applied during the period to Job # 1 = $ 15,880 - $ ( 4,930 + 3,400 + 5,000 ) = $ 2,550

Predetermined overhead rate = Manufacturing Overhead Applied / Direct Materials Used = $ 2,550 / $ 3,400 = 0.75 or 75 %

If total direct materials used was $ 12,200 during March, manufacturing overhead applied during the period was $ 12,200 x 0.75 = $ 9,150.

Manufacturing overhead overapplied = $ 9,150 - $ 8,500 = $ 650

Cost of goods sold ( unadjusted ) = Adjusted Cost of Goods Sold + Overapplied Overhead = $ 11,830 + $ 650 = $ 12,480.