Question

Pribil Farm Equipment is a job-order costing manufacturer that uses a plantwide overhead rate based on direct labor hours. Estimations for the year include $420,000 in overhead and 30,000 direct labor hours. Pribil worked on five jobs in March. Data are as follows:

	Job 89	Job 90	Job 91	Job 92	Job 93
Balance, 3/1	$23,110	$18,240	$ 9,510	$ 0	$ 0
Direct materials	13,000	17,210	22,900	15,240	8,210
Direct labor cost	8,075	11,500	16,250	9,750	4,860
Direct labor hours	1,615 hrs.	2,300 hrs.	3,250 hrs.	1,950 hrs.	972 hrs.

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By March 31, Jobs 89 and 91 were completed and sold. The rest of the jobs remained in process.

A.	Calculate the plantwide overhead rate.
B.	Calculate the Work in Process on March 31.
C.	Calculate the cost of goods sold for March.
D.	Assume Pribil marks up cost by 40%. What is the selling price of Jobs 89 and 91?

Show your calculations!

Answer 1

(A). Plantwide overhead rate;

Formula of plantwide overhead rate is as follow;

Plantwide overhead rate = (Estimated overhead / Estimated direct labor hours)

Estimated overhead = $420000

Estimated direct labor hours = 30000

Now let’s put the values in above given formula;

Plantwide overhead rate ($420000 / 30000) = $14 per direct labor hour

(B). Work in Process on March 31.;

	Job 90	Job 92	Job 93	Total
Balance, 3/1	$18240	$0	$0	$18240
Direct materials	$17210	$15240	$8210	$40660
Direct labor cost	$11500	$9750	$4860	$26110
Overhead (Direct labor hours * Overhead rate	$32200	$27300	$13608	$73108
Total Work-in-process	$79150	$52290	$26678	$158118

(C). Cost of goods sold for March;

	Job 89	Job 91	Total
Balance, 3/1	$23110	$9510	$32620
Direct materials	$13000	$22900	$35900
Direct labor cost	$8075	$16250	$24325
Overhead (Direct labor hours * Overhead rate	$22610	$45500	$68110
Total Cost of Goods Sold	$66795	$94160	$160955

(D). What is the selling price of Jobs 89 and 91?

	Job 89	Job 91
Total Cost of Goods Sold	$66795	$94160
Markup @40% on total cost	$26718	$37664
Selling price for each job	$93513	$131824