Question

On January 1, there were two jobs in process, no. 200 and no. 300. The following costs were applied to these jobs in the prior year:

	Job No.
	200	300
Direct material	$ 5,000	$ 8,000
Direct labor	4,000	3,000
Overhead	4,400	3,300
Total	$13,400	$14,300

During January, the following transactions took place:

*	Raw material costing $40,000 was purchased on account.
*	Jobs #424, #525 and #626 were started and the following costs were applied to them:

	JOB
	424	525	626
Direct materials	$3,000	$10,000	$7,000
Direct labor	5,000	6,000	4,000

*	Job #200 and Job #300 were completed after incurring additional direct labor costs of $2,000 and $4,000, respectively
*	Wages paid to production employees during January totaled $25,000.
*	Depreciation for the month of January totaled $10,000.
*	Utilities bills in the amount of $10,000 were paid for operations during December.
*	Utilities bills totaling $12,000 were received for January operations.
*	Supplies costing $2,000 were used.
*	Miscellaneous overhead expenses totaled $24,000 for January.

Actual overhead is applied to individual jobs at the end of each month using a rate based on actual direct labor costs.

Required:

1	Determine the January overhead rate.

2	Determine the cost of each job.

3	Prepare a statement of cost of goods manufactured.

Answer 1

1)	overhead rate
	4400/4000
	110.00%
2)	cost of each job
			200	300	424	525	626
beginning inventory
direct material			5,000	8,000				13,000
direct labor			4,000	3,000				7,000
overhead			4,400	3,300				7,700
total beginning inventory			13,400	14,300				27,700
cost added during the year
Direct material					3,000	10,000	7,000	20000
direct labor			2,000	4,000	5,000	6,000	4,000	21,000
overhead			2,200	4,400	5,500	6,600	4,400	23,100
total cost added during the yr			4200	8400	13,500	22,600	15,400	64,100
total cost of job			17,600	22,700	13,500	22,600	15,400	91,800
3)	cost of goods manufactured
	direct materials				40,000
	direct labor				25,000
	overhead cost
	depreciation			10,000
	utilities bill			12,000
	supplies			2,000
	miscellaneous overhead			24,000
	Total overhead cost				48,000
	Total manufacturing cost				113,000
	Add:Beginning work in process				27,700
					140,700
	less:ending work in process				51,500
	cost of goods manufactured				89,200