Question

Predetermined Overhead Rate, Application of Overhead to Jobs, Job Cost On April 1, Sangvikar Company had the following balances in its inventory accounts:

Materials Inventory $12,670
Work-in-Process Inventory 21,090
Finished Goods Inventory 8,680

Work-in-process inventory is made up of three jobs with the following costs:

Job 114 Job 115 Job 116
Direct materials $2,360 $2,647 $3,807
Direct labor 1,780 1,540 4,120
Applied overhead 1,157 1,001 2,678

During April, Sangvikar experienced the transactions listed below. Materials purchased on account, $28,520. Materials requisitioned: Job 114, $16,190; Job 115, $12,340; and Job 116, $4,850. Job tickets were collected and summarized: Job 114, 170 hours at $11 per hour; Job 115, 210 hours at $14 per hour; and Job 116, 90 hours at $17 per hour. Overhead is applied on the basis of direct labor cost. Actual overhead was $4,590. Job 115 was completed and transferred to the finished goods warehouse. Job 115 was shipped, and the customer was billed for 125 percent of the cost.

Required:

a. Calculate the predetermined overhead rate based on direct labor cost.
b. Calculate the ending balance for each job as of April 30.

Answer 1

Answer: See explanation

Step-by-step explanation:

a. Calculate the predetermined overhead rate based on direct labor cost.

Job 114:

Predetermined overhead rate = Overhead cost/Direct labor cost

= 1157/1780

= 65%

Job 115:

Predetermined overhead rate = Overhead cost/Direct labor cost

= 1001/1540

= 65%

Job 116:

Predetermined overhead rate = Overhead cost/Direct labor cost

= 2678/4120

= 65%

b. Calculate the ending balance for each job as of April 30

Job 114:

Beginning balance= 2360+1780+1157 = 5297

Material = 16190

Direct labor = 170 × 11 = 1870

Overhead = 1870 × 0.7 = 1309

Ending balance = 24666

Job 115:

Beginning balance= 2647+1540+1001 = 5188

Material = 12340

Direct labor = 210 × 14 = 2940

Overhead = 2940 × 0.7 = 2058

Ending balance = 22526

Less: Finished goods = 22526

Balance = 0

Job 116:

Beginning balance= 3807+4120+2678= 10605

Material = 4850

Direct labor = 90 × 17 = 1530

Overhead = 1530 × 0.7 = 1071

Ending balance = 18056