37. Çomparing job costs to management\'s expectations. Simon Construction Compan
ID: 2606624 • Letter: 3
Question
37. Çomparing job costs to management's expectations. Simon Construction Company uses a job costing system, t applies overhead to jobs at a rate of 60 percent of direct labor cost On August 1, the balance in the Work-in-Process Inventory account was $34,000. It had the following jobs in process on August 1 Job No 9,400 5,000 $34,000 Selected transactions for the month of August follow: 1. Materials issued: Job 480, $800; Job 481, $4,200; Job 482, $2,500 2. Simon assigned labor costs as follows: Job 478, S300; Job 479, $2,600; Job 480, 800; Jo $5,900; Job 482, $1,700Explanation / Answer
SOLUTION:
JOB 478
Work-in-Process 1st August
19,600
Issued Material
0
Cost of labor
300
Overhead @60% m/o August
180
TOTAL
20,080
Expected cost :20,000
JOB 479
9,400
Work-in-Process 1st August
0
Issued Material
2,600
Cost of labor
1,560
Overhead @60% m/o August
13,560
Expected cost :13,000
TOTAL
JOB 480
Work-in-Process 1st August
5,000
Issued Material
800
Cost of labor
7,800
Overhead @60% m/o August
4,680
TOTAL
18,280
Expected cost :15,000
JOB 481
Work-in-Process 1st August
0
Issued Material
4,200
Cost of labor
5,900
Overhead @60% m/o August
3,540
TOTAL
13,640
Expected cost :10,000
JOB 482
Work-in-Process 1st August
0
Issued Material
2,500
Cost of labor
1,700
Overhead @60% m/o August
1,020
TOTAL
5,220
Expected cost :4,000
Job No
Expected cost
Actual cost
Difference
Job No 478
20,000
20,080
80
Job No 479
13,000
13,560
560
Job No 480
15,000
18,280
3,280
Job No 481
10,000
13,640
3,640
Job No 482
4,000
5,220
1,220
TOTAL
62,000
70,780
8,780
If we make a comparison of the expected cost and actual cost for the completed Job No 478 & 479 are not much significant if we compare with other jobs. For avoidance of further discrepancy in future jobs, managers must evaluate and assess the current scenario and try to decrease the cost.
JOB 478
Work-in-Process 1st August
19,600
Issued Material
0
Cost of labor
300
Overhead @60% m/o August
180
TOTAL
20,080
Expected cost :20,000
JOB 479
9,400
Work-in-Process 1st August
0
Issued Material
2,600
Cost of labor
1,560
Overhead @60% m/o August
13,560
Expected cost :13,000
TOTAL
JOB 480
Work-in-Process 1st August
5,000
Issued Material
800
Cost of labor
7,800
Overhead @60% m/o August
4,680
TOTAL
18,280
Expected cost :15,000
JOB 481
Work-in-Process 1st August
0
Issued Material
4,200
Cost of labor
5,900
Overhead @60% m/o August
3,540
TOTAL
13,640
Expected cost :10,000
JOB 482
Work-in-Process 1st August
0
Issued Material
2,500
Cost of labor
1,700
Overhead @60% m/o August
1,020
TOTAL
5,220
Expected cost :4,000
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