Cornerstone Exercise 16-26 (Algorithmic) Prepare Job-Order Cost Sheets, Predeter

Question

Cornerstone Exercise 16-26 (Algorithmic) Prepare Job-Order Cost Sheets, Predetermined Overhead Rate, Ending Balance of WIP, Finished Goods, and COGS At the beginning of June, Rhone Company had two jobs in process, Job 44 and Job 45, with the following accumulated cost information: Direct materials Direct labor Applied overhead Balance, June 1 During June, two more jobs (46 and 47) were started. The following direct materials and direct labor costs were added to the four jobs during the month of June: Job 44 Job 45 $5,300 $1,900 3,000 1,950 $7,280 6,850 1,200 780 Job 44 Job 45 Job 46 Job 47 Direct materials Direct labor $2,500 $7,110 $1,800 $1,700 560 800 6,400 900 At the end of June, Jobs 44, 45, and 47 were completed. Only Job 45 was sold. On June 1, the balance in Finished Goods was zero. 1. Calculate the overhead rate based on direct labor cost. Round your answer to one decimal place

Explanation / Answer

1. Since the predetermined overhead rate is not given, it must be calculated from BWIP amounts using either Job 44 or Job 45.

Using Job 44 predetermined overhead rate         =Applied Overhead/Direct labour

                                                                             =780/1200

= 0.65, or 65%

(The predetermined overhead rate using Job 45 is also same.)

2.                            Rhone Company Job order cost sheet for the month of June

               Job 44                   Job 45                 Job 46                 Job 47

Beginning balance, June 1            $7,280                   $ 6,850                  $ 0                          $ 0

Direct materials                              2,500                     7,110                     1,800                     1,700

Direct labor                                   800                         6,400                     900                         560

Applied overhead                         520                         4,160                     585                         364

Total, June 30                              $11,150                   $24,520 $3,285                   $2,624

3. By the end of June, Jobs 44, 45, and 47 have been transferred out of Work in Process. Thus, the ending

Balance in Work in Process consists of Job 46.

Work in process, June 30 $3,285

While three jobs (44, 45, and 47) were transferred out of Work in Process and into Finished Goods and job 45 is sold, by the end of June, only two jobs remain (Jobs 44 and 47).

Finished goods, June 1 $ 0

Finished goods, June 30 = Finished goods, June 1 + Finished goods job 44 + Finished goods job 47

= 0 + 11,150 + 2,624 = $ 13,774

4. One job, Job 45, was sold during June.

   Cost of goods sold $24,520

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