Question

Sunland Company produces high-quality microscopes for education and health care uses. The company uses a job order costing system. Because the microscopes’ optics require significant manual labor to ensure adherence to strict manufacturing specifications, the company applies overhead on the basis of direct labor hours. At the beginning of 2017, the company estimated its manufacturing overhead would be $1,960,000 and that employees would work a total of 98,000 direct labor hours. During March, the company worked on the following five jobs:

Job		Beginning Balance		Direct Materials added during March		Direct Labor added during March		Direct Labor Hours added during March
134		$118,400		$4,000		$8,300		150
158		121,400		2,700		12,150		370
212		21,900		86,200		36,100		3,400
287		34,400		71,600		31,850		2,790
301				18,860		21,880		1,450
Total		$296,100		$183,360		$110,280		8,160

Jobs 134 and 158 were started in January, Jobs 212 and 287 were started in February, and Job 301 was started in March. During March, workers completed Jobs 134, 158, and 212. Jobs 134 and 212 were delivered to customers during March.

Actual overhead for the month of March was $177,000. The manufacturing overhead account is disposed of annually, not monthly.

1. Calculate the total manufacturing cost for March.

2. Calculate the total cost for each of the five jobs as of March 31.

Answer 1

1. Computation of Manufacturing Cost for March
Job	134	158	212	287	301	Total
Direct material	$4,000	$2,700	$86,200	$71,600	$18,860	$1,83,360
Direct labour	$8,300	$12,150	$36,100	$31,850	$21,880	$1,10,280
Overhead applied	$3,000	$7,400	$68,000	$55,800	$29,000	$1,63,200
Total	$15,300	$22,250	$1,90,300	$1,59,250	$69,740	$4,56,840

Computation of Overhead Applied
Direct Labour Hour	150	370	3400	2790	1450	8160
Recovery Rate	$20	$20	$20	$20	$20	$20
Applied Overhead	$3,000	$7,400	$68,000	$55,800	$29,000	$1,63,200

Overhead Rate= $1960000/98000=$20

2. Computation of Total Cost as on March
Job	134	158	212	287	301	Total
Direct material	$4,000	$2,700	$86,200	$71,600	$18,860	$1,83,360
Direct labour	$8,300	$12,150	$36,100	$31,850	$21,880	$1,10,280
Overhead applied	$3,000	$7,400	$68,000	$55,800	$29,000	$1,63,200
Beginning Balance	$1,18,400	$1,21,400	$21,900	$34,400	$0	$2,96,100
Total	$1,33,700	$1,43,650	$2,12,200	$1,93,650	$69,740	$7,52,940