Pearson Architectural Design uses a job-order costing system and applies studio

Question

Pearson Architectural Design uses a job-order costing system and applies studio overhead to jobs on the basis of direct staff costs. Because Pearson Architectural Design is a service firm, the names of the accounts it uses are different from the names used in manufacturing companies. The following costs were recorded in January:

There were no beginning inventories in January.

At the end of January, only one job was still in process. This job (the Krimmer Corporation Headquarters project) had been charged with $6,680 in direct staff costs.

Required:

1. Compute the predetermined overhead rate that was used during January.

2. Complete the following job cost sheet for the partially completed Krimmer Corporation Headquarters project. (Hint: Cost of goods manufactured equals beginning work in process inventory plus manufacturing costs incurred less ending work in process inventory.) (Round your intermediate calculations to whole number.)

Costs of subcontracted work ___________

Direct staff costs _____________

Studio Overhead_____________

Total cost to January 31____________

Cost of subcontracted work (comparable to direct materials) $ 230,200 Direct staff costs (comparable to direct labor) $ 76,400 Studio overhead (comparable to manufacturing overhead cost applied) $ 124,532 Cost of work completed (comparable to cost of goods manufactured) $ 389,100

Explanation / Answer

Req 1: Pre-determined OH rate: Studio Overheads / Direct Staff Cost *100 $ 124532 /76400 *100 = 163% of Staff cost Req 2: Total Manufacturing cost: Cost of subcontracted work 230200 Add: Sstaffing cost 76400 Add: Studio overheads 124532 Total cost 431132 Less: Cost off wrok completed 389100 Ending WIP balance 42032 (Krimmer corporation job) Total Cost of Krimmer corporation: Total cost incurred 42032 Less: Staff cost 6680 Less: Studio Overheads (6680*163%) 10888 Cost of Sub contracted work 24464

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