Question

Kansas Company uses a job costing accounting system for its production costs. The company uses a predetermined overhead rate based on direct labor-hours to apply overhead to individual jobs. The company prepared an estimate of overhead costs at different volumes for the current year as follows:

Direct labor-hours		150,000			180,000			210,000
Variable overhead costs	$	1,200,000		$	1,440,000		$	1,680,000
Fixed overhead costs		702,000			702,000			702,000
Total overhead	$	1,902,000		$	2,142,000		$	2,382,000

The expected volume is 180,000 direct labor-hours for the entire year. The following information is for March, when Jobs 6023 and 6024 were completed:

Inventories, March 1
Materials and supplies	$	30,000
Work‐in‐process (Job 6023)	$	166,000
Finished goods	$	340,000
Purchases of materials and supplies
Materials	$	409,000
Supplies	$	48,000
Materials and supplies requisitioned for production
Job 6023	$	136,000
Job 6024		120,000
Job 6025		80,000
Supplies		19,000
	$	355,000

Factory direct labor-hours (DLH)
Job 6023	9,000 DLH
Job 6024	8,000 DLH
Job 6025	6,000 DLH

  

Labor costs
Direct labor wages (all hours @ $7)	$	161,000
Indirect labor wages (11,000 hours)		52,800
Supervisory salaries		107,000
Building occupancy costs (heat, light, depreciation, etc.)
Factory facilities	$	18,500
Sales and administrative offices		7,500
Factory equipment costs
Power		10,000
Repairs and maintenance		5,000
Other		8,500
	$	23,500

  

(Note: Regardless of your answer to requirement a, assume that the predetermined overhead rate is $9 per direct labor-hour. Use this amount in answering requirements b through e.)

  

Required:

a. Compute the predetermined overhead rate (combined fixed and variable) to be used to apply overhead to individual jobs during the year. (Round your answer to 2 decimal places.)

b. Compute the total cost of Job 6023 when it is finished.

  

c. How much of factory overhead cost was applied to Job 6025 during March?

d. What total amount of overhead was applied to jobs during March?

  

Answer 1

Solution a:
Computation of Predetermined Overhead rate
Total overhead	2142000
/ Direct labor hours	180000
Predetermined overhead rate	11.90
Solution b:
Computation of Total Cost of Job 6023
Work in process, March 1	166000
Add: Materials requisitioned	136000
Add: Direct labor(9000*$7)	63000
Add: Overehead cost (9000*$11.90)	107100
Total cost of Job 6023	472100
Solution c:
Factory Overhead cost applied to Job 6025
Direct labor hours of Job 6025	6000
*Predetermined Overhead rate	11.9
Factory overhead cost applied to Job 6025	71400
Solution d:
Total overhead applied to Jobs during March
Total Direct labor hours (9000+8000+6000)	23000
*Predetermined Overhead rate	11.9
Factory overhead cost applied to jobs	273700