Problem 20-1A Lott Company uses a job order cost system and applies overhead to

Question

Problem 20-1A Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2017, Job No 50 was the only ob n process. The costs incurred pnor to January 1 on this job overhead $18,720. As of January 1, Job No. 49 had been completed at a cost of $105,300 and was part of finished goods inventory. There was a $17,550 balance in the Raw Materials Inventory account. were as follows: direct materials $23,400, direct labor $14,040, and manu acturing During the month of January, Lott Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $142,740 and $184,860, respectively. The following additional events occurred during the month. 1. Purchased additional raw materials of $105,300 on account. 2. Incurred factory labor costs of $81,900. Of this amount $18,720 related to employer payroll taxes. 3. Incurred manufacturing overhead costs as follows: indirect materials $19,890; indirect labor $23,400; depreciation expense on equipment $14,040; and various other manufacturing overhead costs on account $18,720. 4. Assigned direct materials and direct labor to jobs as follows. ob No $11,700 45,630 35,100 abor $5,850 29,250 23,400 51 52

Explanation / Answer

Overhead application rate = (19890+23400+14040+18720) / 81900 = $0.93 per dollar of direct labour cost

Note: payroll tax expense is considered to be a part of direct labour cost as it is incurred by the employer on account of direct wages.

Manufacturing overhead applied for january = 5850 x 0.93 = $ 5441

Job no 50 Date Direct material direct labour manufacturing overhead Beg $ 23,400 $ 14,040 $ 18,720 Jan $ 11,700 $ 5,850 $ 5,441 $ 35,100 $ 19,890 $ 24,161 Cost of completed job direct material $ 5,100 direct labour $ 19,890 manufacturing overhead $ 24,161 Total cost $ 79,151

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