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	$12,590
Work-in-Process Inventory	21,170
Finished Goods Inventory	8,750

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

	Job 114	Job 115	Job 116
Direct materials	$2,386	$2,655	$3,175
Direct labor	1,740	1,660	4,220
Applied overhead	1,218	1,162	2,954

During April, Sangvikar experienced the transactions listed below.

Materials purchased on account, $28,590.

Materials requisitioned: Job 114, $16,700; Job 115, $12,080; and Job 116, $4,590.

Job tickets were collected and summarized: Job 114, 130 hours at $12 per hour; Job 115, 230 hours at $15 per hour; and Job 116, 70 hours at $18 per hour.

Overhead is applied on the basis of direct labor cost.

Actual overhead was $4,600.

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

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.

	Ending Balance
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. Calculate the predetermined overhead rate based on direct labor cost.
% of direct labor cost
Pre determined overhead = Applied overhead / Direct labour cost
			1218/1740
			70%
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.
	Ending Balance
Job 114	$24,696
Job 115	$23,422
Job 116	$17,081
Total	$65,199
Workings :
Particulars	Job 114	Job 115	Job 116	Total
Opening stock :
Materials	2386	2655	3175	8216
Direct labour	1740	1660	4220	7620
Applied overhead	1218	1162	2954	5334
Total (a)	5344	5477	10349	21170
Current cost :
Materials	16700	12080	4590	33370
Direct labour	1560	3450	1260	6270
Applied overhead	1092	2415	882	4389		70% of labour cost…
Total (b)	19352	17945	6732	44029
Total Cost (a)+(b)	24696	23422	17081	65199
3. Calculate the ending balance of Work in Process as of April 30. When required, round your answer to the nearest dollar.
	WIP Balance
	Particulars	Amount($)
	Job 114	24696
	Job 116	17081
	Total	41777
Job 115 is not considered as it is completed and transferred to finished goods….
4. Calculate the cost of goods sold for April. When required, round your answer to the nearest dollar.
Actual overhead	4600
Applied overhead	4389
Under applied overhead	211
Cost of goods sold = 23422+211		23633
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.
	Selling price
	Particulars	Amount($)
	Price of job 115	23633
	Margin @ 25%	5908
	Total selling price	29541