Need help with J Southworth Company uses a job-order costing system and applies

Question

Need help with J

Southworth Company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of direct materials used in production. Its predetermined overhead rate was based on a cost formula that estimated $222,600 of manufacturing overhead for an estimated allocation base of $159,000 direct material dollars.

The following transactions took place during the year (all purchases and services were acquired on account):

Depreciation recorded for the year, $48,000 (70% relates to factory assets, and the remainder relates to selling and administrative assets).

Rental cost incurred on buildings, $87,000 (70% of the space is occupied by the factory, and 30% is occupied by sales and administration).

Cost of goods manufactured for the year, $558,000.

Sales for the year (all on account) totaled $1,300,000. These goods cost $530,000 according to their job cost sheets.

The balances in the inventory accounts at the beginning of the year were as follows:

34,000

The following transactions took place during the year (all purchases and services were acquired on account):

Explanation / Answer

Hi,

Please find the answer as below:

Calculation for J:

Predetermined Overhead Rate = Manufacturing Overhead Cost Applied/Amount of Allocation Base = 222600/159000*100 = 140%

Overhead Applied = Direct Material Cost*Predetermined Overhead Rate = 142000*140% = 198800.

Thanks.

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