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 the number of units from Job #2 that were sold during March.
Simply enter your answer as a number. Do not type the word units after
your answer.

Answer 1

Answer:

First let us find applied overhead rate:

Job 1 was not completed by end of March and from information given is the only job which is in 'Work in process' at the end March.

Given Work in process (WIP) balance at March 31 = $15,800

Hence total cost of Job 1 as at March 31 = $15,800

Overhead applied to Job 1 = total cost of Job 1 as at March 31 - Beginning WIP of Job 1 - March Direct material cost of Job 1 - March Direct labor cost of Job 1

= 15880 - 4930 - 3400 - 5000

= $2,550

Johnson applies overhead to jobs based on a percentage of direct material.

Hence:

Overhead rate is = 2550 / 3400 = 75% of direct material

Now let us calculate per unit cost of Job 2:

Total cost of production of Job 2 = 4970 + 4200 + 4000 + 4200 * 75% = $16320

Job 2 consisted of 1700 units

Job 2 per unit cost = 16320 / 1700 = $9.60

Overhead variance = Actual overhead - Applied overhead = 8500 - (3400 + 4200 + 4600) * 75% = $650 Over-applied

Only job sold in March is Job 2.

Un-adjusted cost of goods sold =11830 + 650 = $12,480

Number of Job 2 units sold = Un-adjusted Cost of goods sold / per unit cost = 12480 / 9.60 = 1,300

Hence:

Number of units from Job # 2 that were sold during March = 1,300