The following selected data were taken from the books of the Bixby Box Company.

Question

The following selected data were taken from the books of the Bixby Box Company. The company uses job costing to account for manufacturing costs. The data relate to June operations.

   
A) Materials and supplies were requisitioned from the stores clerk as follows:
  
   Job 405, material X, $12,000.
   Job 406, material X, $5,040; material Y, $10,320.
   Job 407, material X, $12,000; material Y, $5,520.
   For general factory use: materials A, B, and C, $3,840.
     
B) Time tickets for the month were chargeable as follows:
      

   
C) Other information:

    Factory paychecks for $62,640 were issued during the month.
    Various factory overhead charges of $31,320 were incurred on account.
    Depreciation of factory equipment for the month was $6,400.
    Factory overhead was applied to jobs at the rate of $3.25 per direct labor hour.
    Job orders completed during the month: Job 405 and Job 406.
    Selling and administrative costs were $3,600.
    Factory overhead is closed out only at the end of the year.

The balance in the factory overhead account would represent the fact that overhead was:

  Job 405 $18,960            5,000 hours         Job 406 $24,000            5,600 hours         Job 407 $13,680            3,360 hours         Indirect labor $ 6,000               

Explanation / Answer

Actual manufacturing overhead is

Indirect Material $3,840

Indirect Labour $ 6,000

Factory overhead charges $31,320

Depreciation $6,400

Total manufacturing overhead control account is $47,560

Applied manufacturing overhead is 13,960 hours*3.25 per hour= $45,370.

So the underapplied overhead is $2,190.

So the balance in the factory overhead account would represent the fact that overhead was underapplied by $2,190.

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