Question

The computer workstation furniture manufacturing that Santana Rey started in January is progressing well. As of the end of June, Business Solution's job cost sheets show the following total costs accumulated on three furniture jobs.

Job 602 Job 603 Job 604

Direct materials $1500 $3,300 $27,000

Direct Labor $800 $1,420 $2,100

Overhead $400 $710 $1,050

Job 602 was started in production in May, and these were to it in May;Direct materials ,$600; Direct Labor $180; and overhead, $90. Jobs 603 and 604 were started in June. Overhead costs is applied with a predetermined rate based on direct labor costs. Jobs 602 and  603 are finished in June, and Job 604 is expected to be finished in July. No raw materials are used indirectly in June. (Assume this company's predetermined overhead rate did not change over these months.)

Required:

1. What is the cost of the raw materials used in June for each of the three jobs and in total?

2. How much total direct labor cost is incurred in June?

3. What predetermined overhead rate is used in June?

4. How much cost is transferred to Finished Goods Inventory in June?

Answer 1

1.

Cost of raw material used in June

Job 602	$900 (1500-600)
Job 603	3,300
Job 604	2,700
Total	$6,900

2.

Total direct labor cost in June

Job 602	620 (800-180)
Job 603	1,420
Job 604	2,100
Total	$4,140

3.

Predetermined overhead rate used in June: = $310+710+1,050 / $4,140

Predetermined overhead rate used in June: = 2,070 / 4,140 = 50%

4.

Cost transferred to finished goods inventory in June :

Job 602	$2,700 (1500+800+400)
Job 603	5,430 (3300+1420+710)
Cost transferred to finished goods	$8,130