Question

The computer workstation furniture manufacturing that Santana Rey started in January is progressing well. As of the end of June, Business Solutions's job cost sheets show the following total costs accumulated on three furniture jobs.

	Job 602					Job 603					Job 604
Direct materials		$	1,500				$	3,300				$	2,700
Direct labor			800					1,420					2,100
Overhead			400					710					1,050

Job 602 was started in production in May, and these costs were assigned to it in May: direct materials, $600; direct labor, $180; and overhead, $90. Jobs 603 and 604 were started in June. Overhead cost is applied with a predetermined rate based on direct labor costs. Jobs 602 and 603 are finished in June, and Job 604 is expected to be finished in July. No raw materials are used indirectly in June. (Assume this company’s predetermined overhead rate did not change over these months.)

Required:
1. What is the cost of the raw materials used in June for each of the three jobs and in total?
2. How much total direct labor cost is incurred in June?
3. What predetermined overhead rate is used in June?
4. How much cost is transferred to finished goods inventory in June?

Answer 1

• [1]

	Job 602	Job 603	Job 604	Total
May Costs	$600	$0	$0	$600
June costs	$900	$3,300	$2,700	$6,900
Total	$1,500	$3,300	$2,700	$7,500

	Job 602	Job 603	Job 604
May Costs	600	0	0
June costs	=1500-600	3300	2700

• [2]

	Job 602	Job 603	Job 604	Total
May Costs	$180	$0	$0	$180
June costs	$620	$1,420	$2,100	$4,140
Total	$800	$1,420	$2,100	$4,320

	Job 602	Job 603	Job 604
May Costs	180	0	0
June costs	=800-180	1420	2100

• [3]

		Job 602	Job 603	Job 604
A	Overhead	$400	$710	$1,050
B	Direct Labor cost	$800	$1,420	$2,100
C = A/B	Predetermined overhead rate	50%	50%	50%

• [4]

Job	Raw Materials	Direct Labor	Overhead Applied	Total Cost	Cost transferred to finished goods	Cost of Ending WIP
602	$1,500	$800	$400	$2,700	$2,700	$0
603	$3,300	$1,420	$710	$5,430	$5,430	$0
604	$2,700	$2,100	$1,050	$5,850	$0	$5,850
Total	$7,500	$4,320	$2,160	$13,980	$8,130	$5,850