Question

Lorenzo Company uses a job order costing system that charges overhead to jobs on the basis of direct materials cost. At year-end, the Work in Process Inventory account shows the following.

Date Explanation Debit Credit Balance
2017
Dec.31 Direct materials cost 1,800,000 1,800,000
31 Direct labor cost 250,000 2,050,000
31 Overhead applied 612,000 2,662,000
31 To finished goods 2,572,000 90,000
1. Determine the predetermined overhead rate used (based on direct materials cost).
2. Only one job remained in work in process inventory at December 31, 2017. Its direct materials cost is $27,000. How much direct labor cost and overhead cost are assigned to this job?
Required 1
Required 2
Determine the predetermined overhead rate used (based on direct material cost).
Overhead Rate
Choose Numerator: / Choose Denominator: = Overhead Rate
Overhead costs / Direct materials cost = Overhead rate
$612,000 / $1,800,000 = 34%
Required 1
Required 2
Only one job remained in work in process inventory at December 31, 2017. Its direct materials cost is $27,000. How much direct labor cost and overhead cost are assigned to this job?
Total cost of job in process $90,000
Less: Overhead applied
Less: Materials cost of job in process
Direct labor cost

Answer 1

See below

Step-by-step explanation:

Required 1

Overhead rate

= Overhead costs ÷ Direct material cost

= [$612,000 ÷ $1,800,000] × 100

= 34%

Required 2

Total cost of job in process

$90,000

Less: Materials cost of job in process

($27,000)

Less: Overhead applied (34% × $27,000)

($9,180)

Direct labor cost

$53,820