Question

The Detroit Gear Corporation uses Normal Job-Order Costing in its only production department. Overhead is applied to jobs by a predetermined rate, which is based on direct labor hours. The Company began business on December 1, 2018. The only job started into process during December was Job 460. During December me Company purchased direct materials with a total cost of $45,000 $2,500 of these direct materials were used on Job 460. The Company also charged a total of $7,650 in conversion costs to Job 450 during December Job 460 was NOT finished as of the end of December and no other jobs were worked on during the month There was no underapplied or overapplied overhead for December The following transactions occurred during 2019. HELL 1. Estimated overhead for 2019 is $1,250,000. The estimated direct labor hours for 2019 total 200,000. 2. Direct materials purchased during 2019 cost a total of $760,000. 3. Direct materials were used on jobs during 2019 as follows: $160,250 Job 500 $180,760 Job 550 $237,125 Job 600 $131,876 4. During 2019, direct labor hours were charged to jobs as follows: Job 460 45,000 hours Job 500 66,100 hours Job 560 60,800 hours Job 600 23,100 hours All direct labor hours used during 2019 had a rate of $20 per hour. 6. Other Costs incurred during 2019 include the following: Factory Equipment Calibration $125,000 Factory Employee Training 85,000 Indirect Labor 370,000 Accounting Dept. Salaries 175,000 Other Selling & Administrative Salaries 250,000 Indirect Material 50,000 Factory Insurance 136,000 Factory Utilities 120,000 Selling & Administrative Utilities 24,000 Miscellaneous Overhead 123,000 Misc. Selling & Administrative Expense 8,250 Factory Equipment Depreciation 175,000

Answer 1

	Beginning Work in Process in 2019
	Job450
	Direct materials	$2,500
	Conversion Cost	$7,550
	Total Work in process (Job 450)	$10,050
	Predetermined overhead rate in 2019
	Estimated Overhead	$1,250,000
	Estimated Direct Labor hours	200,000
	Predetermined overhead rate in 2019	$6.25	per labor hour	(1250000/200000)
			A	B=A*$6.25	C=A*$20
		Job	Direct labor hour	Applied Overhead	Direct Labor Cost
		450	45000	$281,250	$900,000
		500	56100	$350,625	$1,122,000
		550	60800	$380,000	$1,216,000
		600	23100	$144,375	$462,000
		Total	185000	$1,156,250	$3,700,000
		SCHEDULE SUMMARISING MANUFACTURING COST
	X		D	C	E	F=C+D+E+X		G	H=F/G
	Beginning work in Process	Job	Materials	Direct Labor	Applied Overhead	Total Manufacturing Cost	Completed/Not Completed	Units	Unit Cost
	$10,050	450	$150,250	$900,000	$281,250	$1,341,550	Completed	268310	$5.00
		500	$180,750	$1,122,000	$350,625	$1,653,375	Completed	110296	$14.99
		550	$237,125	$1,216,000	$380,000	$1,833,125	Completed	153015	$11.98
		600	$131,875	$462,000	$144,375	$738,250	Not Completed
		TOTAL	$700,000	$3,700,000	$1,156,250	$5,566,300
		SCHEDULE OF JOBS SOLD IN APRIL
			H	I	J=H*I	K	L=K*I
		Job No.	Cost per unit	Units Sold	Cost of goods sold	Selling Price	Sales Revenue
		450	$5.00	200,000	$1,000,000	$8	$1,600,000
		550	$11.98	153,015	$1,833,125	$13	$1,989,195
		TOTAL			$2,833,125		$3,589,195
										$3,589,195 $2,833,125 $756,070 INCOME STATEMENT FOR 2019 Sales Revenue Cost of goods sold Gross Profit Selling and Administration expenses: Accounting Department Salaries Other selling and administrative salaries Selling and administrative utilities Miscellaneous Overhead Misc. Selling and admin. Expense Finished goods Warehouse depreciation Total Selling and administrative expenses Operating Income $175,000 $250,000 $24,000 $123,000 $8,250 $7,500 $587,750 $168,320 Credit PRORATION OF OVER/UNDERAPPLIED OVERHEAD MANUFACTURING OVERHEAD ACCOUNT Debit Factory Equipment Calibration $125,000 Factory Employee Training $85,000 Indirect labor $370,000 Indirect Materials $50,000 Factory Insurance $136,000 Factory Utilities $120,000 Factory Equipment Depreciation $175,000 Applied Manufacturing Overhead Overapplied Overhead $95,250 $1,156,250 $1,156,250 Total $1,156,250 $738,250 $422,229 $2,833,125 $3,993,604 Ending Work in Process Inventory Ending Finished Goods Inventory Cost of goods sold Total Overapplied Overhead approtioned to Work in process Overapplied Overhead approtioned to Finished goods Inventory Overapplied Overhead approtioned to Cost of goods sold $17,607.73 (738250/3993604)*95250 $10,070.43 (422229/3993604)*95250 $67,571.84 (2833125/3993604)*95250