Question

As of the end of June, the job cost sheets at Racing Wheels, Inc., show the following total costs accumulated on three custom jobs.

Job 102 Job 103 Job 104
Direct materials $ 37,000 $ 48,000 $ 57,000
Direct labor 20,000 28,700 43,000
Overhead 8,200 11,767 17,630
Job 102 was started in production in May, and the following costs were assigned to it in May: direct materials, $9,000; direct labor, $3,500; and overhead, $1,505. Jobs 103 and 104 were started in June. Overhead cost is applied with a predetermined rate based on direct labor cost. Jobs 102 and 103 were finished in June, and Job 104 is expected to be finished in July. No raw materials were used indirectly in June. Using this information, answer the following questions. (Assume this company’s predetermined overhead rate did not change across these months.)

Answer 1

Question Completion:

1. What is the cost of the raw materials requisitioned in June for each of the three jobs?

2. How much direct labor cost is incurred during June for each of the three jobs?

3. What predetermined overhead rate is used during June?

4. How much total cost is transferred to finished goods during June?

Answer:

Racing Wheels, Inc.

Job 102 Job 103 Job 104

1. Direct materials $ 37,000 $ 48,000 $ 57,000

2. Direct labor 20,000 28,700 43,000

3. The predetermined overhead rate = $0.41 per direct labor cost.

4. The total cost transferred to Finished Goods Inventory in June

= $167,672

Step-by-step explanation:

a) Data and Calculations:

The total costs accumulated on three custom jobs.

Job 102 Job 103 Job 104 Total

Beginning WIP: $14,005

Direct materials $9,000

Direct labor 3,500

Overhead 1,505

Direct materials $ 37,000 $ 48,000 $ 57,000 $ 142,000

Direct labor 20,000 28,700 43,000 91,700

Overhead 8,200 11,767 17,630 37,597

Total costs $ 79,205 $ 88,467 $ 117,630 $285,302

Predetermined overhead rate = total overhead/total direct labor

= $37,597/$91,700

= $0.41

Finished goods in June:

Job 102 $ 79,205

Job 103 $ 88,467

Total cost $167,672