Question

OBJECTIVE 34 Exercise 5.12 Predetermined Overhead Rate, Application of Overhead to Jobs, Job Cost On April 1, Sangvikar Company had the following balances in its inventory accounts: Materials Inventory $12,730 Work-in-Process Inventory ventory 21,340 Finished Goods inventory Finished Goods Inventory 8,700 Work-in-process inventory is made up of three jobs with the following costs: Job 114 Job 115 Job 116 Direct materials $2,411 $2.640 $3,650 Direct labor 1,800 1,560 4,300 Applied overhead 1, 170 1 ,014 2,795

Answer 1

1. Predetermined overhead rate = 1,170 / 1,800 = 0.65 or 65 % of direct labor cost.

2. & 3 :

	Job 114	Job 115	Job 116	Totals
Work in Process Inventory, April 1	$ 5,381	$ 5,214	$ 10,745	$ 21,340
Costs incurred during April
Direct Materials	16,500	12,200	5,000	33,700
Direct Labor	1,800	3,080	1,440	6,320
Applied Overhead	1,170	2,002	936	4,108
Total manufacturing costs for April	19,470	17,282	7,376	44,128
Total Cost of Work in Process	24,851	22,496	18,121	65,468
Completed and Transferred Out	-	(22,496)	-	(22,496)
Work in Process Inventory, April 30	24,851	0	18,121	42,972

4. Unadjusted cost of goods sold : $ 22,496

Overhead underapplied = $ 4,415 - $ 4,108 = 307

Adjusted cost of goods sold = $ 22,496 + $ 307 = $ 22,803

5. Price of the job sold = $ 22,803 x 125 % = $ 28,504