Question

JOB ORDER COSTING spring, Inc. has the following data for 2018. The Company allocates overhead based on use of direct labor hours. Any over/under-applied overhead is closed directly to Cost of Goods Sold. Beginning Balance Ending Balance Raw Materials $20,000 Finished Goods Work in Process $75,000 $130,000 $210,000 $225,000 Actual overhead Cost of goods sold (unadjusted) Direct labor hours used (cach employee paid the same wage) Gross profit rate Operating expenses Raw materials purchased Raw materials used (545,000 direct, $5,000 indirect) Over-applied overhead $150,000 $200.000 2.000 60% $140,000 $70,000 $50,000 $20,000 Answer the following: Applied Overhead (3pts) Cost of Goods Manufactured (3pts) Adjusted Cost of Goods Sold (3pts) The total cost added to a job when one direct labor hour is used (4pts) Inventory (as shown on the end of period Balance Sheet) (3pts) Net Income (4pts)

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Answer 1

Answer is given below with working notes

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a Applied Overhead Actual overhead Over-applied overhead Total Applied Overhead $150,000 $20,000 $170,000 b Cost of goods manufactured Cost of goods sold Add: Closing stock of Finished goods $200,000 $225,000 $425,000 $210,000 $215,000 Less: Opening stock of Finished goods Cost of goods manufactured c Adjusted Cost of Goods sold Cost of goods sold Less: Over-applied overhead Adjusted Cost of Goods sold 200,000 20,000 180,000 d Total cost added to a job when one direct labor hour is used Direct Labor cost Overhead applied Total cost added $27.50 $85.00 $112.50 Cost of goods manufactured Add: Closing stock of WIP $215,000 $130,000 $345,000 $75,000 $270,000 Less: Opening stock of WIP Total manufacturing cost Total manufacturing cost Less: Applied Overheads Raw material used Labor cost Total labor hours Labour hour rate $270,000 $170,000 $45,000 $55,000 2,000 $27.50 Overhead rate - per direct labor hour Total Overheads applied Total labor hours $170,000 $85.00 2,000 e Inventory Raw material inventory WIP Inventory Finished Goods Inventory $40,000 $130,000 $225,000 Raw material inventory Opening stock Purchases $20,000 $70,000 $90,000 $50,000 $40,000 Raw material used Closing stock of Raw material inventory Income Statement For the year ended December 31, 2018 Sales $450,000 Adjusted Cost of Goods sold $180,000 Gross profit $270,000 Less: Operating expense $140,000 Net Income $130,000 Adjusted Cost of Goods sold Gross profit ratio COGS percentage $180,000 60% 40%(1-60%) $450,000 ($180,000/40%) Sales