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)

Answer 1

Applied Overhead = Actual overhead + Over-applied overhead = $150000 + $20000 = $170000

Cost of goods manufactured: $215000

Adjusted cost of goods sold: $180000

Total cost added to a job when one direct labor hour is used = $55000/2000 direct labor hours = $27.50

Inventory:
Raw materials	40000
Work in process	130000
Finished goods	225000
Total inventory $	395000

Net income: $130000

Sales ($180000/40%)	450000
Cost of goods sold (40%)	180000
Gross profit (60%)	270000
Operating expenses	140000
Net income	130000

Working:

Calculating backwards from the cost of goods sold:

Beginning raw materials	20000
Add: Raw materials purchased	70000
Cost of materials available for use	90000
Less: Ending raw materials	40000
Cost of materials used	50000
Less: Indirect materials	5000
Direct materials used		45000
Direct labor		55000
Overhead		170000
Total manufacturing costs		270000
Add: Beginning work in process		75000
Total cost of work in process		345000
Less: Ending work in process		130000
Cost of goods manufactured		215000
Add: Beginning finished goods		210000
Cost of goods available for sale		425000
Less: Ending finished goods		225000
Cost of goods sold (unadjusted)		200000
Less: Over-applied overhead		20000
Cost of goods sold (adjusted)		180000