Question

Johnson Inc. is a job-order manufacturing company that uses a predetermined overhead rate, based on direct labor hours, to apply overhead to individual jobs.

For the current year, estimated direct labor hours are 95,000 and estimated factory overhead is $617,500.
The following information is for September of the current year:
September 1, inventories:
Materials inventory $ 7,500
Work-in-process inventory (All Job A) 31,200
Finished goods inventory 67,000
Material purchases 104,000
Direct materials requisitioned:
Job A 65,000
Job B 33,500
Direct labor hours:
Job A 4,200
Job B 3,500
Labor costs incurred;
Direct labor ($8.50/hour) 65,450
Indirect labor 13,500
Supervisory salaries 6,000
Rental costs:
Factory 7,000
Administrative offices 1,800
Total equipment depreciation costs:
Factory 7,500
Administrative offices 1,600
Indirect materials used 12,000
Job A was completed during September and Job B was started but not finished.
Required:
1. What is the total cost of Job A?
2. What is the total factory overhead applied during September?
3. What is the over-applied or under-applied overhead for September?

Answer 1

1. $159,200

2. $50,050

3. $4,050 overapplied

Step-by-step explanation:

1. Calculation for The total cost of Job A?

TOTAL COST OF JOB A

Direct materials requisitioned $ 65,000

Add Direct labor costs $ 35,700

(4,200 hours * $ 8.50 per hour)

Add Applied overheads $ 27,300

(4,200 hours * $ 6.50 per hour)

($617,500/95,000=$ 6.50 per hour)

Add Work in process $ 31,200

Total Cost of Job A $ 159,200

Therefore Total Cost of Job A will be $ 159,200

2. Calculation for What is the total factory overhead applied during September

First step is to calculate Predetermined Overhead Rate

Predetermined Overhead Rate=$617,500/95,000

Predetermined Overhead Rate=$ 6.50 per hour

Now let calculate the total factory overhead applied

Total factory overhead applied =(Job A 4,200+Job B 3,500) × ($6.50)

Total factory overhead applied =7,700×$6.50

Total factory overhead applied =$50,050

Therefore the total factory overhead applied will be $50,050

3. Calculation for What is the over-applied or under-applied overhead for September

First step is to calculate Actual factory overhead

Actual factory overhead :

Indirect labor 13,500

Supervisory salaries 6,000

Rental costs:Factory 7,000

Factory 7,500

Indirect materials used 12,000

Actual factory overhead =$46,000

Second step is to calculate Predetermined Overhead Rate

Predetermined Overhead Rate=$617,500/95,000

Predetermined Overhead Rate=$ 6.50 per hour

Now let calculate the over-applied or under-applied overhead for September

Over-applied or under-applied overhead =(Job A 4,200+Job B 3,500*$ 6.50 per )-$46,000

Over-applied or under-applied overhead =(7,700*$6.50)-$46,000

Over-applied or under-applied overhead =$50,050-$46,000

Over-applied or under-applied overhead =$4,050 overapplied

Therefore the over-applied for September is $4,050