Question

Kansas Company uses a job costing accounting system for its production costs. The company uses a predetermined overhead rate based on direct labor-hours to apply overhead to individual jobs. The company prepared an estimate of overhead costs at different volumes for the current year as follows:

Direct labor-hours		150,000			180,000			210,000
Variable overhead costs	$	900,000		$	1,080,000		$	1,260,000
Fixed overhead costs		702,000			702,000			702,000
Total overhead	$	1,602,000		$	1,782,000		$	1,962,000

The expected volume is 180,000 direct labor-hours for the entire year. The following information is for March, when Jobs 6023 and 6024 were completed:

Inventories, March 1
Materials and supplies	$	33,000
Work‐in‐process (Job 6023)	$	164,000
Finished goods	$	339,500
Purchases of materials and supplies
Materials	$	409,000
Supplies	$	49,000
Materials and supplies requisitioned for production
Job 6023	$	130,000
Job 6024		122,500
Job 6025		81,000
Supplies		17,000
	$	350,500

Factory direct labor-hours (DLH)
Job 6023	10,000 DLH
Job 6024	8,000 DLH
Job 6025	6,000 DLH

  

Labor costs
Direct labor wages (all hours @ $9)	$	216,000
Indirect labor wages (13,000 hours)		54,600
Supervisory salaries		108,000
Building occupancy costs (heat, light, depreciation, etc.)
Factory facilities	$	19,500
Sales and administrative offices		8,000
Factory equipment costs
Power		12,000
Repairs and maintenance		5,500
Other		7,500
	$	25,000

  

(Note: Regardless of your answer to requirement a, assume that the predetermined overhead rate is $9 per direct labor-hour. Use this amount in answering requirements b through e.)

  

Required:

a. Compute the predetermined overhead rate (combined fixed and variable) to be used to apply overhead to individual jobs during the year. (Round your answer to 2 decimal places.)

​Predetermined Overhead Rate: $____________ per DLH

b. Compute the total cost of Job 6023 when it is finished.

Total Cost of job 6023: ________________

c. How much of factory overhead cost was applied to Job 6025 during March?

Factory Overhead Cost of job 6025: __________________

d. What total amount of overhead was applied to jobs during March?

Total amount of overhead: _______________

e. Compute actual factory overhead incurred during March.

Actual factory overhead incurred: ______________

f. At the end of the year, Kansas Company had the following account balances:

Overapplied overhead	$	3,000
Cost of goods sold		2,950,000
Work-in-process inventory		110,000
Finished goods inventory		236,000

Assuming that the overapplied overhead is not material, show the new account balances in the following table.

Overapplied Overhead: ____________

Cost of Goods Sold: ______________

Work-in-process Inventory: _______________

Finished Goods Inventory: __________________

Answer 1

a	Estimated Direct Labor Hours	150000	180000	210000
	Total Overheads	1602000	1782000	1962000
	Predetermined Overhead Rate	10.68	9.9	9.34

b	Total cost for Job 6023
	Work in progress Job 6023	164000	Given
	Material Requisitioned for 6023	130000	Given
	Direct Labor Cost (10000*9)	90000
	Overhead (10000*9)	90000	Predetermined Rate to be taken as 9 given in question
	Total cost for Job 6023	474000

c	Overhead applied to Job 6025
	Direct Labor Hours	6000	Given in que
	Predetermined Ovh Rate	9	Given in que
	Overhead applied to Job 6025	54000

d	Total ovehread applid to job during march
	Direct Labor Hour 6023	10000
	Direct Labor Hour 6024	8000
	Direct Labor Hour 6025	6000
	Total Hours	24000
	Predetermined Ovh Rate	9	Given in que
	Total ovehread applid to job during march	216000	24000*9

e	Actual Factory Overhead incurred during March
	Supplies	17000	Given in que
	Indirect Labor Wages	54600	Given in que
	Supervisory Salaries	108000	Given in que
	Factory Facility	19500	Given in que
	Factory Equipment Cost	25000	Given in que
		224100

f	Overapplied Overhead: ____________	0	This has to be Zero
	Cost of Goods Sold: ______________	2947000	2950000-3000
	Work-in-process Inventory: _______________	110000
	Finished Goods Inventory: __________________	236000