Sigma Corporation applies overhead cost to jobs on the basis of direct labor cos

Question

Sigma Corporation applies overhead cost to jobs on the basis of direct labor cost. Job V, which was started and completed during the current period, shows charges of $5,000 for direct materials, $8,000 for direct labor, and $6,000 for overhead on its job cost sheet. Job W, which is still in process at year-end, shows charges of $2,500 for direct materials and $4,000 for direct labor. Required: Should any overhead cost be added to Job W at year-end? If so, how much? Explain. During the current month, Carolina Furniture charged $30,000 of direct materials, $40,000 of direct labor, and $90,000 of manufacturing overhead to work in process. The company uses a standard cost system and its month-end variances are as follows: The ending balance in the Work in Process Inventory account exceeds the beginning balance by $2,000. The total standard cost per unit is $10. Compute the following: A. The actual direct materials costs incurred during the month $ B. The actual direct labor costs incurred during the month $ C. The actual manufacturing overhead costs incurred during the month $ D. The number of units completed during the month $

Explanation / Answer

Problem # 4)

Overhead charging rate on direct Labor cost (on the basis of Job V) = Overhead Charges / Direct Labor Cost

= 6000 / 8000 = 75% of DLC

Overhead chargable to Job W in WIP = Direct Labor cost incurred on Job W * 75% = $4000 * 75% = $3000

Overhead is to be charged to the all works done during the month on the predetermined basis.

Problem 5)

A. The actual direct materials costs incurred during the month = $30000 + 3000 - 500 =$32500

B. The actual direct labor costs incurred during the month = $40000 + $2000 + $2500 = $44500

C. The actual manufacturing overhead costs incurred during the month = $90000 - $1500 - $1200 = $87300

D. The number of units completed during the month = (32500 + 44500 + 87300) / 10 = 164300 / 10 = 16430 units

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