Tyler Tooling Company uses a job order cost system with overhead applied to prod

Question

Tyler Tooling Company uses a job order cost system with overhead applied to products on the basis of machine hours. For the upcoming year, the company estimated its total manufacturing overhead cost at $209,220 and total machine hours at 63,400. During the first month of operations, the company worked on three jobs and recorded the following actual direct materials cost, direct labor cost, and machine hours for each job:

Job 101 was completed and sold for $50,300.
Job 102 was completed but not sold.
Job 103 is still in process.

Actual overhead costs recorded during the first month of operations totaled $16,660.

Required:
1. Calculate the predetermined overhead rate. (Round your answer to 2 decimal places.)

2. Compute the total manufacturing overhead applied to the Work in Process Inventory account during the first month of operations. (Round your intermediate calculations to 2 decimal places.)

3. Compute the balance in the Work in Process Inventory account at the end of the first month. (Round your intermediate calculations to 2 decimal places.)

4. How much gross profit would the company report during the first month of operations before making an adjustment for over- or underapplied manufacturing overhead? (Round your intermediate calculations to 2 decimal places.)

5-a. Determine the balance in the Manufacturing Overhead account at the end of the first month. (Round your intermediate calculations to 2 decimal places.)

5-b. Is it over- or underapplied?

Job 101 Job 102 Job 103 Total Direct materials used $ 11,500 $ 8,900 $ 4,200 $ 24,600 Direct labor $ 17,500 $ 6,300 $ 4,100 $ 27,900 Machine hours 1,700 hours 2,700 hours 800 hours 5,200 hours

Explanation / Answer

1. The predetermined over head rate is $ 3.3 per hour

209,220 / 63400 = 3.3

2. Over head applied to the total manufacturing work in progress is $ 17,160

5,200*3.3 = 17,160

3. The balance in WIP account at the end was

Direct material. 24600

Direct labour. 27900

Manufacturing overhead 2640

Total. 55,140

4. Gross profit for first month of operation is 15,690

Explanation:

Job 101 cost

Direct material. 11500

Direct labour. 17500

Manufacturing

Overhead. 5610

Total expenditure. 34610

The job 101 is sold for 50300

Gross profit is 50300-34610 = 15,690

5 a

Actual over head incurred. 16660

Overhead applied. 17,160

Balance in manufac overhead. 500 cr balance

5b since the actual overhead is less than the over head applied. The overhead is over applied by $ 500

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