Question

In: Accounting

Jackson Company applies overhead to products using a pre-determined rate of $11.20 per direct labor hour....

Jackson Company applies overhead to products using a pre-determined rate
of $11.20 per direct labor hour.

During 2019, Jackson Company began work on three jobs. Information
relating to these three jobs appears below:

                                  Job #359      Job #360      Job #361
direct materials ..............    $98,000       $75,000       $91,000
direct labor cost .............    $98,600       $79,900       $86,700
direct labor hours ............      5,100         4,700         5,800

By the end of 2019, job #359 and job #361 had been completed. Job #360
was not completed by the end of 2019. Additionally, by the end of 2019,
job #361 had been sold while job #359 was not sold. Jackson Company had
total actual overhead cost of $169,000 during 2019.

Calculate the amount of finished goods inventory reported in Jackson
Company's December 31, 2019 balance sheet.

Solutions

Expert Solution

Answer:-

Applied overhead = (5800+4700+5100)*11.20   = $ 174,720

Actual overhead = 169000 ( Given )

Overhead Under applied = (174720-169000) = 5720 ( benefit to the organization, a Favourable Variance )

This Benefit should be allocated to each Job Using Direct Labour Hours

Total Hours Worked = +5100+4700+5800 = 15,600 Hours

Apportioned Benefit =

Job 359 = ( 5100 / 15600 ) * 5720 = $1870

Job 360 = (4700 / 15600 ) * 5720 = $1723

Job 361 = ( 5800 / 15600 )*5720 = $2127

As Job # 359 and # 361 Completed but only Job # 361 was sold during the year

The finished goods inventory is Job # 359 only because job #360 is yet to be completed.

so Cost of Job # 359 :-

Direct Material = $98,000

Direct Labour = $98,600

Overhead = 5100 * 11.20 = 57,120

Total Cost of Job # 359 = 98000+98600+57120 = $ 253,720

Minus Benefited Calculated above of Favourable Variance = 253720 - 1870 = $ 251,850 ( Cost of Finished Goods Inventory)

ekkarill92 answered 2 years ago
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