Question

The following information is for Punta Company for July: Factory overhead costs were applied to jobs at the predetermined rate of $51.50 per labor hour. Job S incurred 6,265 labor hours; Job T used 4,365 labor hours. Job S was shipped to customers during July. Job T was still in process at the end of July. The overapplied or underapplied overhead to the Cost of Goods Sold account was closed at the end of July. Factory utilities, factory depreciation, and factory insurance incurred are summarized as follows: Utilities $ 16,950 Depreciation 49,500 Insurance 19,800 Total $ 86,250 f. Direct materials and indirect materials used are as follows: Job S Job T Total Material A $ 33,000 $ 75,750 $ 108,750 Material B 14,700 37,700 52,400 Subtotal $ 47,700 $ 113,450 $ 161,150 Indirect materials 215,500 Total $ 376,650 g. Direct labor incurred for the two jobs and indirect labor are as follows: Job S $ 64,500 Job T 54,000 Indirect labor 151,000 Total $ 269,500

Required:
1. Calculate the total manufacturing cost for Job S and Job T for July. (Round your intermediate calculations and final answers to 2 decimal places.)
2. Calculate the amount of overapplied or underapplied overhead and state whether the Cost of Goods Sold account will be increased or decreased by the adjustment.?

Answer 1

The total manufacturing costs are $434,847.50 for Job S and $392,247.50 for Job T. Overhead is overapplied by $461,195, which will result in a decrease to the Cost of Goods Sold account.

Step-by-step explanation:

Calculating Total Manufacturing Cost

To calculate the total manufacturing cost for Jobs S and T in July, we combine direct materials, direct labor, and applied factory overhead. For Job S, the following costs are incurred:

• Direct materials: $47,700
• Direct labor: $64,500
• Applied overhead: 6,265 labor hours * $51.50 per hour = $322,647.50

Total manufacturing cost for Job S = $47,700 + $64,500 + $322,647.50 = $434,847.50.

For Job T, the following costs are incurred:

• Direct materials: $113,450
• Direct labor: $54,000
• Applied overhead: 4,365 labor hours * $51.50 per hour = $224,797.50

Total manufacturing cost for Job T = $113,450 + $54,000 + $224,797.50 = $392,247.50.

Calculating Overapplied or Underapplied Overhead:

The actual factory overhead costs incurred are $86,250. The total applied overhead for both jobs is $322,647.50 for Job S and $224,797.50 for Job T, totaling $547,445. This means factory overhead is overapplied because the applied amount exceeds the actual costs. To calculate the exact figure:

• Total applied overhead: $547,445
• Actual overhead costs: $86,250
• Overapplied overhead = $547,445 - $86,250 = $461,195

The overapplied overhead of $461,195 will decrease the Cost of Goods Sold account.

Answer 2

Solution 1 : Total Manufacturing Cost of Job S is $434,847.5 while for Job T is $ 392,247.5

Solution 2 : The amount of overheads has been over-applied and the Cost of Goods Sold will decrease by $94,695

Step-by-step explanation:

Solution 1

Particulars Job S ($) Job T ($)

Direct material 47,700 113,450

Direct labor 64,500 54,000

Overhead Applied (Hours* $51.50) 322,647.5 224,797.5

Total manufacturing cost 434,847.5 392,247.5

Solution 2

In order to calculate the amount of over-applied or under-applied, we will take the difference between the overheads applied and the actual overheads incurred during the period. If the applied overheads are more than the actual then the amount has been over-applied and the Cost of Goods Sold will decrease. However, in case the overheads were under-applied then the Cost of Goods Sold would increase. The calculation has been done below:

Actual Overhead = $86,250 + $215,500 + $151,000 = $452,750

Applied overhead = 322,647.5 + 224,797.5 = $547,445

Over-applied/Under-applied overhead = Applied overhead - Actual Overhead

547,445 - 452,750 = $94,695. The overheads has been over-applied.

Cost of Goods Sold account will be decreased by $94,695.