Question

Problem 15-01A Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2020, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $21,600, direct labor $12,960, and manufacturing overhead $17,280. As of January 1, Job 49 had been completed at a cost of $97,200 and was part of finished goods inventory. There was a $16,200 balance in the Raw Materials Inventory account. During the month of January, Lott Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $131,760 and $170,640, respectively. The following additional events occurred during the month. 1. 2. 3. Purchased additional raw materials of $97,200 on account. Incurred factory labor costs of $75,600. Of this amount $17,280 related to employer payroll taxes. Incurred manufacturing overhead costs as follows: indirect materials $18,360; indirect labor $21,600; depreciation expense on equipment $12,960; and various other manufacturing overhead costs on account $17,280. Assigned direct materials and direct labor to jobs as follows. 4. Job No. Direct Materials $10,800 42,120 32,400 Direct Labor $5,400 27,000 21,600 Your answer is correct. Calculate the predetermined overhead rate for 2020, assuming Lott Company estimates total manufacturing overhead costs of $907,200, direct labor costs of $ 756,000, and direct labor hours of 21,600 for the year. Predetermined overhead rate

Answer 1

Computation of Company’s Predetermined overhead rate:-
	Predetermined overhead rate	=	Estimated manufacturing overhead	=	$907,200	=	120%
			Estimated Direct Professional labor cost		$756,000
Computation of Finished Goods Inventory :-
					Job No. 51
	Direct Materials				$                 42,120
	Direct labor cost				$                 27,000
	Overhead costs applied (27000*120%)				$                 32,400
	Finished Goods Inventory				$               101,520
Computation of overhead applied during the period:-
	Actual labor cost		Predetermined overhead rate		Overhead applied
	a		b		c = a*b
	5400+27000+21600=54000		120%		$                  64,800
B	Computation of amount of over- or under applied overhead :-
a	Actual Overhead (18360+21600+12960+17280)				$                 70,200
b	Overhead applied				$                 64,800
c	Under-applied Overhead (a-b)				$                   5,400

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