Lopez Company uses a job order cost accounting system that charges overhead to j

Question

Lopez Company uses a job order cost accounting system that charges overhead to jobs on the basis of direct material cost. At year-end, the Goods in Process Inventory account shows the following.

Determine the overhead rate used (based on direct material cost). (Omit the "%" sign in your response.)

Only one job remained in the goods in process inventory at December 31, 2011. Its direct materials cost is $37,000. How much direct labor cost and overhead cost are assigned to it? (Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)

Date Explanation Debit Credit Balance 2011 Dec. 31 Direct materials cost 1,700,000 1,700,000         31 Direct labor cost 290,000 1,990,000         31 Overhead costs 646,000 2,636,000         31 To finished goods 2,547,000 89,000

Explanation / Answer

Hi,

Please find the answers as follows;

Part A:

Overhead Rate = 646000/1700000*100 = 38%

Part B:

Total Cost of Job in Process = 89000

Less Overhead Applied (37000*38%) = 14060

Direct Labor Cost = 89000 - 37000 - 14060 = 37940

Therefore:

Direct labor cost = 37940

Overhead Cost = 14060

Thanks.

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