tice Problem #4 S Company, which uses a job-costing system, began business on Ja
ID: 2555647 • Letter: T
Question
tice Problem #4 S Company, which uses a job-costing system, began business on January 1, and applies manufacturing overhead on the basis of direct-labor cost. The following information relates to the first year of operations Budgeted direct labor and manufacturing overhead were anticipated to be $200,000 and $250,000, respectively Job nos. 1, 2, and 3 were begun during the year and had the following charges for direct material and direct labor: $145,000 320,000 55,000 $35,000 65,000 80,000 Job nos. 1 and 2 were completed and sold on account to customers at a profit of 60% of cost. Job no. 3 remained in production. Actual manufacturing overhead by year-end totaled $233,000. Rock Star adjusts all under- and overapplied overhead to cost of goods sold Compute the company's predetermined overhead application rate. a) b) Compute Rock Star's ending work-in-process inventory. c) Determine Rock Star's sales revenue. d) Was manufacturing overhead under- or overapplied during 20x3? Required: By how much? Present the necessary journal entry to handle under- or overapplied manufacturing overhead at year-end Does the presence of under- or overapplied overhead at year-end indicate that Rock Star's accountants made a serious error? e) f)Explanation / Answer
Solution a:
Predetermined overhead application rate = Estimated overhead / Budgeted direct labor cost
= $250,000/$200,000 = $1.25 per direct labor cost or 125% of direct labor cost
Solution b:
Value of ending WIP = Cost incurred on Job 3
= Direct material + Direct labor + applied overhead for job 3 = $55,000 + $80,000 + ($80000*125%) = $235,000
Solution c:
Solution d:
Total applied overhead on all jobs = $43,750 + $81,250 + $100,000 = $225,000
Actual manufacturing overhead incurred = $233,000
Overhead was underapplied, and under applied overhead = $233,000 - $225,000 = $8,000
Solution e:
Compuatation of Sales Revenue of Rock Star Particulars Job 1 Job 2 Total Direct material $145,000.00 $320,000.00 $465,000.00 Direct Labor $35,000.00 $65,000.00 $100,000.00 Applied overhead (125% of direct labor cost) $43,750.00 $81,250.00 $125,000.00 Total cost of Jobs $223,750.00 $466,250.00 $690,000.00 Profit on Cost (60%) $134,250.00 $279,750.00 $414,000.00 Sales Revenue $358,000.00 $746,000.00 $1,104,000.00Related Questions
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