Question

At the beginning of the month, Arthur's Olde Consulting Corporation had two jobs in process that had the following costs assigned from previous months:

Job Number Direct Labor Applied Overhead
SY-400 $ 23,790 ?
SY-403 15,870 ?
During the month, Jobs SY-400 and SY-403 were completed but not billed to customers. The completion costs for SY-400 required $26,700 in direct labor. For SY-403, $79,500 in labor was used.
During the month, the only new job, SY-404, was started but not finished. Total direct labor costs for all jobs amounted to $150,570 for the month. Overhead in this company refers to the cost of work that is not directly traced to particular jobs, including copying, printing, and travel costs to meet with clients. Overhead is applied at a rate of 70 percent of direct labor costs for this and previous periods. Actual overhead for the month was $107,600.
Required:
(a) What are the costs of Jobs SY-400 and SY-403 at the beginning of the month and when completed?
(b) What is the cost of Job SY-404 at the end of the month?
(c) How much was under- or overapplied service overhead for the month?

Answer 1

Cost at the beginning:

Cost of SY-400 $40,443.00

Cost SY-403 $ 26,979.00

Cost at month end:

Cost of SY-400 $85,833.00

Cost of SY-403 $162,129.00

Cost of SY-404 $75429

Overhead was under-applied by $2,201.00

Step-by-step explanation:

At the beginning of the month costs of jobs SY-400 and SY-403 are the direct labor costs incurred already plus 70% of the direct labor cost as overhead applied:

Cost of SY-400=$23,790+($23,790*70%)=$40,443.00

Cost SY-403=$15,870+($15,870*70%) =$ 26,979.00

Costs at the end of the month would be cost at the beginning plus new direct labor cost incurred as well as the overhead on the new direct labor cost:

Cost of SY-400=$40,443.00+$26,700+($26,700*70%)=$85,833.00

Cost of SY-403=$ 26,979.00+$79500+(70%*$79500)=$162,129.00

Direct labor cost of SY-404=$150,570- $26,700-$79,500=$44370

Cost of SY-404=$44370+(70%*$44370)=$75429

Actual overhead is $107,600

Overhead applied=(70%*$44370)+(70%*$79500)+($26,700*70%)=$105,399.00

Under-applied overhead=$107,600-$105,399=$2,201.00