Question

Applying Overhead to Jobs, Costing Jobs

Gorman Company builds internal conveyor equipment to client specifications. On October 1, Job 877 was in process with a cost of $18,690 to date.

During October, Jobs 878, 879, and 880 were started. Data on costs added during October for all jobs are as follows:

	Job 877	Job 878	Job 879	Job 880
Direct materials	$14,380	$5,970	$3,510	$1,770
Direct labor	14,600	8,500	2,200	2,400

Overhead is applied to production at the rate of 75% of direct labor cost. Job 877 was completed on October 28, and the client was billed at cost plus 50%. All other jobs remained in process.

	Required:
1.	Prepare a brief job-order cost sheet showing the October 1 balances of all four jobs, plus the direct materials and direct labor costs during October. There is no need to calculate applied overhead at this point or to total the costs.
2.	Calculate the overhead applied to each job during October.
3.	Calculate the balance in Work in Process on October 31.
4.	What is the price of Job 877?

Answer 1

Part 1

	Job 877	Job 878	Job 879	Job 880
Beginning balance	18690
Direct materials	14380	5970	3510	1770
Direct labor	14600	8500	2200	2400

Part 2

Applied overhead in October for:

Job 877 = $14,600 × 0.75 = $10,950

Job 878 = $8,500 × 0.75 = $6,375

Job 879 = $2,200 × 0.75 = $1,650

Job 880 = $2,400 × 0.75 = $1,800

Part 3

Work in Process, October 31:

Job 878 (5970+8500+6375)	$20845
Job 879 (3510+2200+1650)	$7360
Job 880 (1770+2400+1800)	$5970
Total	$34175

Part 4

Cost of Job 877 = 18690+14380+14600+10950 = $58620

Price of Job 877 = 58620+(58620*0.50) = $87930