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	$12,840
Work-in-Process Inventory	21,060
Finished Goods Inventory	8,670

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

	Job 114	Job 115	Job 116
Direct materials	$2,432	$2,669	$3,383
Direct labor	1,900	1,560	4,400
Applied overhead	1,140	936	2,640

During April, Sangvikar experienced the transactions listed below.

1. Materials purchased on account, $28,650.
2. Materials requisitioned: Job 114, $16,360; Job 115, $12,110; and Job 116, $4,880.
3. Job tickets were collected and summarized: Job 114, 170 hours at $11 per hour; Job 115, 240 hours at $14 per hour; and Job 116, 90 hours at $17 per hour.
4. Overhead is applied on the basis of direct labor cost.
5. Actual overhead was $4,630.
6. Job 115 was completed and transferred to the finished goods warehouse.
7. 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. Predetermined overhead rate = Applied overhead/Direct labor cost = $1140/$1900 OR $936/$1560 OR $2640/$4400 = 60% of direct labor cost

2.

	Ending Balance
Job 114	$              24,824
Job 115	$              22,651
Job 116	$              17,751

Working:

	Job 114	Job 115	Job 116	Total
Work in process, April 1	5472	5165	10423	21060
Costs incurred during April:
Direct materials	16360	12110	4880	33350
Direct labor	1870	3360	1530	6760
	(170 x $11)	(240 x $14)	(90 x $17)
Applied overhead	1122	2016	918	4056
	($1870 x 0.60)	($3360 x 0.60)	($1530 x 0.60)
Ending balance, April 30 $	24824	22651	17751	65226

3. Ending balance of Work in Process as of April 30: $42,575

Job 114	$              24,824
Job 116	$              17,751
Total	$              42,575

4. Cost of goods sold for April: $22,651

Job 115

$              22,651

5. Price of Job 115: $28,314

Job cost	22651
Markup (25% x $22651)	5662.75
Price $	28314