Question

The following selected data were taken from the books of the Bixby Box Company. The company uses job costing to account for manufacturing costs. The data relate to June operations.

A) Materials and supplies were requisitioned from the stores clerk as follows:

Job 405, material X, $12,500.
Job 406, material X, $5,250; material Y, $10,750.
Job 407, material X, $12,500; material Y, $5,750.
For general factory use: materials A, B, and C, $4,000.

B) Time tickets for the month were chargeable as follows:


Job 405 $19,750 5,200 hours
Job 406 $25,000 5,800 hours
Job 407 $14,250 3,500 hours
Indirect labor $ 6,250

C) Other information:

Factory paychecks for $65,250 were issued during the month.
Various factory overhead charges of $32,625 were incurred on account.
Depreciation of factory equipment for the month was $6,500.
Factory overhead was applied to jobs at the rate of $3.25 per direct labor hour.
Job orders completed during the month: Job 405 and Job 406.
Selling and administrative costs were $3,750.
Factory overhead is closed out only at the end of the year.

The balance in the factory overhead account would represent the fact that overhead was:
A. $6,000 underapplied.
B. $3,750 overapplied.
C. $4,250 overapplied.
D. $2,250 underapplied.

Answer 1

option D = $2,250 underapplied

Step-by-step explanation:

There will not be the need to use all the parameters mention in the question above in order to determine the value of the balance in the factory overhead account. The following information and parameters are needed in order to solve this problem. Thus, without mincing words let's dive straight into the solution to the question above:

=> Materials A, B, and C and supplies were requisitioned from the stores clerk = $4,000, Factory paychecks for that month = $65,250, Indirect labor = $6,250, Variable Factory Overhead Charges that occurred on the account = $32,625 and Depreciation of factory equipment for the month = $6,500.

=> Job 406, material X = $5,250.

The balance in the factory overhead account = 4,000 + 6,250 + 32,625 + 6,500 = $49,375.

The next thing to do is to determine the value for the Applied Manufacturing Overhead. This can be calculated below as:

= [5,200 + 5,800 + 3,500] × 3.25 = $47,125 = Applied Manufacturing Overhead

Therefore, $49,375 - $47,125 = $2250. This value is the value for the overhead that is underapplied.