Jackson Company applies overhead to products using direct labor hours as the act

Question

 Jackson Company applies overhead to products using direct labor hours as the activity level. During 2009, Jackson Company had the following estimated costs: 

 Direct materials .................... $204,000 Direct labor ........................  180,000 (consisting of 12,000 direct labor hours) Advertising expense .................   35,000 Rent on factory building ............   36,000 Depreciation .................... ...   60,000 Indirect materials ..................   20,000 Sales commissions ...................   50,000 Production supervisor's salary ......   40,000 Insurance on sales equipment ........   17,000 

 It is known that 60% of the depreciation relates to equipment in the administrative offices while 40% of the depreciation relates to equipment in the factory. 

 During 2009, Jackson Company began work on three jobs. Information relating to these three jobs appears below (assume there were no jobs in process at January 1, 2009): 

                                   Job #359      Job #360      Job #361 direct materials ..............    $72,000       $45,000       $61,000 direct labor ..................    $54,000       $42,000       $60,000 direct labor hours ............      3,600         2,800         4,000 

 By the end of 2009, job $359 and job #361 had been completed. Job #360 was not completed by the end of 2009. Additionally, by the end of 2009, job #361 had been sold while job #359 was not sold. During 2009, Jackson Company recorded total actual overhead cost of $100,000. 

 Calculate the cost of goods sold reported by Jackson Company for 2009 after the overhead variance has been closed 

Explanation / Answer

                         Statement of Cost of goods sold

Direct Materials
Job # 359                              $72,000
Job #360                               $45,000
Job #361                              $61,000          $178,000

Direct Labor
Job # 359                           $54,000
Job #360                             $42,000
Job #361                            $60,000          $156,000

Overheads Applied
Job # 359 3,600x10          $36,000
Job #360 2,800x10       $28,000
Job #361 4,000x10        $40,000            $104,000
                                                             $438,000
Less : WIP Cost of Job #360                   
         ($45,000+$42,000+$28,000)          $115,000
Cost of goods Manufactured                   $323,000
Less : FG Job #359
         ($72,000+$54,000+$36,000)         $162,000
                                                            $161,000
Less : Over applied overheads                   $4,000
Cost of goods sold                              $157,000
                                                         

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