Question

Problem 1 On August 1, Camino Company had the following balances in its inventory accounts: Materials Inventory $16,350 Work-in-Process Inventory 21,232 Finished Goods Inventory 15,200 The $21,232 of the work-in-process inventory is made up of three jobs with the following costs: Job 30 Job 31 Job 32 Direct materials $2,650 $3,650 Direct labor 1,900 1,340 4,000 Applied overhead 1,520 1,072 3,200 $1,900 During August, Camino experienced the following transactions: a. Purchases materials on account for $21,000. b. Requisitioned materials: Job 30, $12,500; Job 31, $11,200, and Job 32, $5,500. C. Collected and summarized job tickets: Job 30, 250 hours at $12 per hour, JOD 31, 275 hours at $15 per hour; and Job 32, 140 hours at $20 per hour. d. Applied overhead on the basis of direct labor cost. e. Actual overhead was $8,718. f. Completed and transferred Job 31 to the finished goods warehouse, g. Shipped Job 31 and billed the customer for 130 percent of the cost. Required: 1. Calculate the predetermined overhead rate based on direct labor cost. 2. Calculate the ending balance for each job as of August 31. 3. Calculate the ending balance of Work in Process as of August 31. 4. Calculate the cost of goods sold for August

Answer 1

1) Calculation of Predetermined Overhead rate Job 30 Direct labor, August 1 Overhead applied , August 1 $ $ 1,900 1,520 Predetermined rate 1,520 / 1,900 80% Predetermined Overhead rate 80% of Direct labor cost

2) Calculation of Ending Balance of Each job Job No: Job 31 Job 30 Job 32 2,650 1,900 1,520 6,070 1,900 1,340 1,072 4,312 3,650 4,000 3,200 10,850 Beginning Balance Direct materials Direct labor Applied Overhead Total Beginning Balance (A) Add: Cost added during the month Direct materials Direct labor Applied Overhead Total cost added (B) Ending Balance (A+B) 12,500 3,000 2,400 17,900 23,970 11,200 4,125 3,300 18,625 22,937 5,500 2,800 2,240 10,540 21,390 $ $ Job 30 31 Ending Balance $ 23,970 $ 22,937 $ 21,390 32 Working Notes Job 30 | $ Direct labor hours (a) Direct labor rate (b) Direct labor cost (c=a xb) Applied overhead (c x 80%) 250 12 | $ 3,000 $ 2,400 $ Job 31 275 15 4,125 3,300 $ $ $ Job 32 140 20 2,800 2,240

c) Cost of Ending Work in process Job 31, has been completed and transferred to finished. That means Job 30 & 32 still in process. Ending Work in process Job Ending Balance 30 23,970 32 21,390 Ending Work in process 45,360 Ending Work in process $ 45,360 Job 31 has been sold during the month. Hence cost of Job 31 would be the cost of goods sold Cost of goods sold 22,937