Question

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 $ 17,000 $ 64,000 $ 57,000 Direct labor 13,000 29,500 45,000 Overhead 6,240 14,160 21,600 Job 102 was started in production in May and the following costs were assigned to it in May: direct materials, $10,000; direct labor, $3,100; and overhead, $1,488. Jobs 103 and 104 are started in June. Overhead cost is applied with a predetermined rate based on direct labor cost. Jobs 102 and 103 are finished in June, and Job 104 is expected to be finished in July. No raw materials are used indirectly in June. Using this information, answer the following questions. (Assume this company’s predetermined overhead rate did not change across these months). 1. What is the cost of the raw materials requisitioned in June for each of the three jobs? (Omit the "$" sign in your response.) Job 102 $ Job 103 $ Job 104 $ 2. How much direct labor cost is incurred during June for each of the three jobs? (Omit the "$" sign in your response.) Job 102 $ Job 103 $ Job 104 $ 3. What predetermined overhead rate is used during June? (Omit the "%" sign in your response.) Predetermined overhead rate % 4. How much total cost is transferred to finished goods during June? (Omit the "$" sign in your response.) Total transferred cost $

Answer 1

1) Calculation of cost of the raw materials requisitioned in June (Amount in $)

Job	May (a)	June (b = c-a)	Total (c)
Job 102	10,000	7,000	17,000
Job 103	0	64,000	64,000
Job 104	0	57,000	57,000
Total	10,000	128,000	138,000

2) Calculation of labor cost for June (Amount in $)

Job	May (a)	June (b = c-a)	Total (c)
Job 102	3,100	9,900	13,000
Job 103	0	29,500	29,500
Job 104	0	45,000	45,000
Total	3,100	84,400	87,500

3) Predetermined Overhead rate for the month will be equal to predetermined overhead rate for Job 102.

Predetermined Overhead rate = Estimated Overhead costs (Job 102)/Estimated Direct Labor (Job 102)

= $6,240/$13,000 = 0.48 or 48%

4) Calculation of cost transferred to Finished goods during june (Amt in $)

Job	Direct Materials (A)	Direct Labor (B)	Applied Overhead (C = B*48%)	Total Cost (A+B+C)	Cost transferred to Finished Goods
102	17,000	13,000	6,240	36,240	36,240
103	64,000	29,500	14,160	107,660	107,660
104	57,000	45,000	21,600	123,600	0
Total	138,000	87,500	42,000	267,500	143,900

Only job 102 and 103 is completed in june hence only cost related to job 102 and 103 will be transferred to finished goods.