Question

Exercise 15-3 Analysis of cost flows LO C2

As of the end of June, the job cost sheets at Racing Wheels, Inc., show the following total costs accumulated on three custom jobs.

	Job 102			Job 103			Job 104
Direct materials	$	26,000		$	68,000		$	46,000
Direct labor		13,000			28,200			40,000
Overhead applied		5,330			11,562			16,400

Job 102 was started in production in May and the following costs were assigned to it in May: direct materials, $9,000; direct labor, $2,800; and overhead, $1,148. Jobs 103 and 104 were started in June. Overhead cost is applied with a predetermined rate based on direct labor cost. Jobs 102 and 103 were finished in June, and Job 104 is expected to be finished in July. No raw materials were used indirectly in June. Using this information, answer the following questions. (Assume this company’s predetermined overhead rate did not change across these months.)

1&2. Complete the table below to calculate the cost of the raw materials requisitioned and direct labor cost incurred during June for each of the three jobs?
3. Using the accumulated costs of the jobs, what predetermined overhead rate is used?
4. How much total cost is transferred to finished goods during June?

REQ 1 and 2 Complete the table below to calculate the cost of the raw materials requisitioned and direct labor cost incurred during June for each of the three jobs?

Direct materials

Job	May	June	Total
Job 102
Job 103
Job 104
Total

Direct Labor

Job	May	June	Total
Job 102
Job 103
Job 104
Total

REQ 3 Using the accumulated costs of the jobs, what predetermined overhead rate is used?

Overhead rate Choose numerator / Choose denominator = Overhead Rate Job 102 / = / = Job 103 / = / = Job 104 / = / = Numerator options- AR, Average raw materials inv, COGS, Estimated DL, Estimated overhead costs, Net sales, Raw materials used Denominator options- AR, Average raw materials inv, COGS, Estimated DL, Estimated overhead costs, Net sales, Raw materials used,

REQ 4

How much total cost is transferred to finished goods during June?

Job	Dm	DL	Applied OH	Total cost	Cost transferred to finished goods
102	$26,000	$13,000
103	68,000	28,200
104	46,000	40,000
Total	$140,000	81,200

Answer 1

1&2)	Racing Wheel Inc.
Cost of Raw Material requisitioned and Direct Labor cost incurred
	Direct Material
Job	May	June	Total
102	$             9,000.00	$           17,000.00	$              26,000.00
103		$           68,000.00	$              68,000.00
104		$           46,000.00	$              46,000.00
Total	$             9,000.00	$       1,31,000.00	$          1,40,000.00
	Direct Labor
Job	May	June	Total
102	$             2,800.00	$           10,200.00	$              13,000.00
103		$           28,200.00	$              28,200.00
104		$           40,000.00	$              40,000.00
Total	$             2,800.00	$           78,400.00	$              81,200.00
3)
Predermined Overhead
Formula for Predermined Overhead Rate=Estimated Overhead/Estimated Allocation base
	Job 102	Job 103	Job 104
Estimated Overhead=(A)	$             5,330.00	$           11,562.00	$              16,400.00
Direct Labor cost(Allocation base)=(B)	$           13,000.00	$           28,200.00	$              40,000.00
Predermined Overhead used for Job =(A)/(B)	41%	41%	41%
4)
Cost transferred to Finished goods during June
Job	Direct Material	Diect Labor	Applied Overhead	Total cost	Cost Transferred to Finished Goods
102	$           26,000.00	$           13,000.00	$                5,330.00	$       44,330.00	$                              44,330.00
103	$           68,000.00	$           28,200.00	$              11,562.00	$    1,07,762.00	$                           1,07,762.00
104	$           46,000.00	$           40,000.00	$              16,400.00	$    1,02,400.00
Total	$       1,40,000.00	$           81,200.00	$              33,292.00	$    2,54,492.00	$                           1,52,092.00
Note: Only Job 102 and Job 103 are completed ,so total cost of these two Jobs are transferred to Finished goods.Job 104 is expected to
finished in July.