Question

ABC Company uses a job order costing system and had three jobs in process at the beginning of the month. The beginning balance in the WIP account was $145,400, made up of $42,400, $65,100, and $37,900 as shown on the cost sheets for Jobs 921, 922, and 923 respectively. During the month, ABC added the following materials and labor costs to each job.

Inventory	Materials used for Month	Labor Dollars used for Month
Job 921	12,200	30,000
Job 922	13,400	17,000
Job 923	17,000	9,500
Total	42,600	56,500

ABC estimated overhead costs for the period at $38,025 and allocates overhead based on direct labor dollars. ABC estimated total direct labor dollars to be $58,500. Actual overhead costs for the month were $37,800.

ABC completed job 922 and sold it for $127,250 in cash during the month.

a. What is the predetermined overhead rate?

b. What is the balance in the WIP account at the end of the month?

c. Is overhead over or under applied? By how much?

d. Explain how the entry to close the Manufacturing Overhead account would affect the Cost of Goods Sold?

e. What is the amount of gross margin ABC would report on its income statement for the month?

Answer 1