Question

Predetermined Overhead Rate, Application of Overhead to Jobs, Job Cost, Unit Cost On August 1, Cairle Company's work-in-process inventory consisted of three jobs with the following costs: Job 70 Job 71 Job 72 Direct materials $1,600 $2,000 $850 Direct labor 1,900 1,300 900 Applied overhead 1,425 975 675 During August, four more jobs were started. Information on costs added to the seven jobs during the month is as follows: Job 70 Job 71 Job 72 Job 73 Job 74 Job 75 Job 76

Direct materials $800 $1,235 $3,550 $5,000 $300 $560 $80 Direct labor 1,000 1,400 2,200 1,800 600 860 172
Before the end of August, Jobs 70, 72, 73, and 75 were completed. On August 31, Jobs 72 and 75 were sold.
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 August 31.
Ending Balance
Job 70 $
Job 71 $
Job 72 $
Job 73 $
Job 74 $
Job 75 $
Job 76 $
3. Calculate the ending balance of Work in Process as of August 31.
$
4. Calculate the cost of goods sold for August.
$
5. Assuming that Cairle prices its jobs at cost plus 20 percent, calculate Cairle’s sales revenue for August.

Answer 1

Cairle Company

1. The predetermined overhead rate based on direct labor cost is:

= 75% of direct labor cost.

2. August 31 Ending Balances:

Job 70 $7,475

Job 71 $7,960

Job 72 $9,825

Job 73 $8,150

Job 74 $1,350

Job 75 $2,065

Job 76 $384

3. Ending balance of Work in Process, August 31:

= $9,694

4. The cost of goods sold for August = $11,890

5. Sales revenue for August = $14,268

Step-by-step explanation:

a) Data and Calculations:

Work in process inventory on August 1:

Job 70 Job 71 Job 72 Job 73 Job 74 Job 75 Job 76

Direct materials $1,600 $2,000 $850

Direct labor 1,900 1,300 900

Applied overhead 1,425 975 675

Direct materials $800 $1,235 $3,550 $5,000 $300 $560 $80

Direct labor 1,000 1,400 2,200 1,800 600 860 172

Applied overhead 750 1,050 1,650 1,350 450 645 129

Total costs $7,475 $7,960 $9,825 $8,150 $1,350 $2,065 $384

Work in Process:

Job 71 $7,960

Job 74 1,350

Job 76 384

Total $9,694

Cost of goods sold:

Job 72 $9,825

Job 75 $2,065

Total $11,890

Sales revenue = $14,268 ($11,890 * 1.20)