Question

Predetermined Overhead Rate, Application of Overhead to Jobs, Job Cost

On April 1, Sangvikar Company had the following balances in its inventory accounts:
Materials Inventory $12,750
Work-in-Process Inventory 21,060
Finished Goods Inventory 8,500
Work-in-process inventory is made up of three jobs with the following costs:
Job 114 Job 115 Job 116
Direct materials $2,384 $2,603 $3,085
Direct labor 1,800 1,420 4,420
Applied overhead 1,260 994 3,094
During April, Sangvikar experienced the transactions listed below.
Materials purchased on account, $28,920.
Materials requisitioned: Job 114, $16,800; Job 115, $12,460; and Job 116, $5,410.
Job tickets were collected and summarized: Job 114, 170 hours at $11 per hour; Job 115, 200 hours at $14 per hour; and Job 116, 100 hours at $19 per hour.
Overhead is applied on the basis of direct labor cost.
Actual overhead was $4,535.
Job 115 was completed and transferred to the finished goods warehouse.
Job 115 was shipped, and the customer was billed for 125 percent of the cost.
Required:
1. Calculate the predetermined overhead rate based on direct labor cost.
% of direct labor cost
2. Calculate the ending balance for each job as of April 30. When required, round your answers to the nearest dollar. Use your rounded answers in subsequent computations, if necessary.
Ending Balance
Job 114 $
Job 115 $
Job 116 $
3. Calculate the ending balance of Work in Process as of April 30. When required, round your answer to the nearest dollar.
$
4. Calculate the cost of goods sold for April. When required, round your answer to the nearest dollar.
$
5. Assuming that Sangvikar prices its jobs at cost plus -25 percent, calculate the price of the one job that was sold during April. Round to the nearest dollar.
$

Answer 1

The predetermined overhead rate based on direct labor cost is calculated to be 59.34%. The ending balance for each job as of April 30 is $5,444 for Job 114, -$11,351 for Job 115, and $10,599 for Job 116. The ending balance of Work in Process as of April 30 is $16,043. The cost of goods sold for April is $16,368. The price of the one job that was sold during April is $20,460.

Step-by-step explanation:

The predetermined overhead rate based on direct labor cost can be calculated by dividing the estimated overhead costs by the estimated direct labor costs. In this case, the estimated overhead costs are $4,535 and the estimated direct labor costs are $7,640. Therefore, the predetermined overhead rate would be:

Predetermined Overhead Rate = (Estimated Overhead Costs / Estimated Direct Labor Costs) x 100

Predetermined Overhead Rate = ($4,535 / $7,640) x 100 = 59.34%

To calculate the ending balance for each job, we need to consider the costs incurred and subtract the costs transferred out. Let's calculate the ending balance for each job:

Job 114: Direct Materials + Direct Labor + Applied Overhead - Transferred Out

Job 114: $2,384 + $1,800 + $1,260 - $0 = $5,444

Job 115: $2,603 + $1,420 + $994 - $16,368 (Transferred Out) = -$11,351

Job 116: $3,085 + $4,420 + $3,094 - $0 = $10,599

The ending balance for Work in Process can be calculated by summing up the ending balances of all jobs still in progress. Therefore, the ending balance of Work in Process would be:

Work in Process: Ending Balance of Job 114 + Ending Balance of Job 116 = $5,444 + $10,599 = $16,043

The cost of goods sold for April can be calculated by summing up the costs of all completed and transferred jobs. In this case, only Job 115 was completed and transferred. Therefore, the cost of goods sold for April would be:

Cost of Goods Sold: Transferred Out of Job 115 = $16,368

To calculate the price of the job that was sold during April, we need to multiply the cost by 1.25. Therefore, the price of the job would be:

Price: Cost of Job 115 x 1.25 = $16,368 x 1.25 = $20,460