Question

On April 1, Sangvikar Company had the following balances in its inventory accounts:

Materials Inventory	$12,730
Work-in-Process Inventory	21,340
Finished Goods Inventory	8,700

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

	Job 114	Job 115	Job 116
Direct materials	$2,411	$2,640	$3,650
Direct labor	1,800	1,560	4,300
Applied overhead	1,170	1,014	2,795

During April, Sangvikar experienced the transactions listed below.

1. Materials purchased on account, $29,000.

2. Materials requisitioned: Job 114, $16,500; Job 115, $12,200; and Job 116, $5,000.

3. Job tickets were collected and summarized: Job 114, 150 hours at $12 per hour; Job 115, 220 hours at $14 per hour; and Job 116, 80 hours at $18 per hour.

4. Overhead is applied on the basis of direct labor cost.

5. Actual overhead was $4,415.

6. Job 115 was completed and transferred to the finished goods warehouse.

7. Job 115 was shipped, and the customer was billed for 125 percent of the cost.

Instructions:

1) Calculate the predetermined overhead rate based on direct labor cost

2) Calculate the ending balance for each job as of April 30

3) Calculate the ending balance of work-in-process as of April 30

4) Calculate the cost of Goods Sold for April

5) Assuming that Sangvikar prices its jobs at cost plus 25 percent, calculate the price of the one job that was sold during April (round to the nearest dollar)

Answer 1

1) Predetermined Overhead Rate

Formula for Predetermined Overhead Rate = Applied Overhead / Direct Labor

1	Job 114
	Applied Overhead / Direct Labor
	1,170 / 1,800 = 65%
2	Job 115
	Applied Overhead / Direct Labor
	1,014 / 1,560 = 65%
3	Job 116
	Applied Overhead / Direct Labor
	2,795 / 4,300 =65%

2) & 3) Ending Balance of Each Job and WIP as of 30th April

		Job 114	Job 115	Job 116
	Opening Materials	2,411	Sold Out	3650
	Purchase	16,500		5000
		18,911		8650
	Direct Labor	(1800+1800) = 3600		(1440+4300)=5740
	Actual Overhead @70% of DL (Note Below)	70% of 3600 =2520		70%of 5740=4018
	Balance	18911+3600+2525		8650+5740+4018
		25,031		18,408

Actual Overhead = Actual Overhead / Direct Labor = 4,415 / 6,320 = 70%

4) Cost of Goods Sold in April

	Job No 115
Opening Materials	2640
Purchases	12200
	14840
Direct Labor	(1560+3080)=4640
Actual Overhead@70%of DL	70%of 4640 =3248
Cost of Goods Sold	14840+4640+3248=22,728

5) Selling Price of Sold Job

Cost of Job 115 = 22,728

Selling Price = 1.25% of 22,728 =28,410