Sigma Corporation applies overhead cost to jobs on the basis of direct labor cos

Question

Sigma Corporation applies overhead cost to jobs on the basis of direct labor cost. Job V, which was started and completed during the current period, shows charges of $6,200 for direct materials, $8,500 for direct labor, and $6,035 for overhead on its job cost sheet. Job W, which is still in process at year-end, shows charges of $4,300 for direct materials and $4,600 for direct labor. Required 1a. Should any overhead cost be applied to Job W at year-end? Yes No 1b. How much overhead cost should be applied to Job W? Overhead cost

Explanation / Answer

1a. YES the overhead cost should allocate to Job W as well.

1b.the overhead cost allocated to job W is on the based of Direct labour

so the Job W overhead cost = $6,035/($8,500+$4,600)*$4,600=$2,119.16

2.The Job W cost will be reported at Work in process in the sigma corporation financial statments at the end of the year.

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