Question

Kansas Company uses a job costing accounting system for its production costs. The company uses a predetermined overhead rate based on direct labor-hours to apply overhead to individual jobs. The company prepared an estimate of overhead costs at different volumes for the current year as follows. Direct labor-hours Variable overhead costs Fixed overhead costs Total overhead 150, $1,050, een 102,000 $1,752,000 100,000 $1,200,000 72.000 31,962,000 210.000 $1,470,006 102, $2,172,000 The expected volume is 180.000 direct labor-hours for the entire year. The following information is for March, when Jobs 6023 and 6024 were completed Inventories, March 1 Materials and supplies Work-in-process (Job 6023) Finished goods Purchases of materials and supplies $ 31,500 $160.000 $337,080 sue, $49.00 Supplies Materials and supplies requisitioned for p Job 6023 $132,000 122.500 Job 025 Supplies 10,000 DLH 6,000 DLH Direct labor wages (1 hours $8) Indirect labor wages (10,000 hours) Supervisory Salaries Building occupancy costs (heat, ligt, depre Factory facilities Sales and administrative offs Factory equipment costs Repairs and maintenance Required: Compute the predetermined overhead rate combined food and variable to be used to cow head to individual jobs during the year. (Note: Regardless of your answer to requirement (al assume that the predetermined overhead rate is $9 per direct labor-hour Use this amount in answering requirements of through el b. Compute the total cost of Job 6023 when it is finished c. How much of factory overhead cost was applied to Job 6025 during March d. What total amount of overhead was applied to jobs during March? e. Compute actual factory overhead incurred during March f. At the end of the year, Kansas Company had the following account balances Overapplied overhead Cost of goods sold Work in process inventory Finished goods inventory 121,000 249,000 Assuming that the overapplied overhead is not material show the new account balances in the following table

Answer 1

Requirement (a) $ (a) Total estimated Factory OH (b) Estimated Direct labor hours (c) Pre-Determined OH rate (a/b) (1962000/180000) 19,62,000 1,80,000 10.90 per DLH $ Requirement (b) Job 6023 Beginning Work-in-Process (+) Material requisitioned (+) Direct labor cost (9500*8) (+) Applied Factory OH (9500*9) Total Cost for Job 6023 1,60,000 1,32,000 76,000 85,500 4,53,500 $ $ Requirement (c) Direct labor hours for Job 6025 Factory OH rate Factory OH applied for Job 6025 (6000*$9) 6,000 9.00 54,000 $ Requirement (d) Direct labor hours for Job 6023 Direct labor hours for Job 6024 Direct labor hours for Job 6025 Total Direct Labor hours Factory OH rate Total Factory OH applied for the jobs (25500*$9) 9,500 10,000 6,000 25,500 9.00 2,29,500 $

Requirement (e) Indirect Materials-Supplies requisitioned Indirect Labor Supervisor's Salaries Factory Facilities Power Repairs and Maintenance Other factory equipment costs Actual Factory OH incurred for the jobs 19,000 40,000 1,08,000 29,000 12,000 5,500 8,000 2,21,500 $ Requirement (f) When over-applied OH is immaterial, it is adjusted against cost of goods sold only. Work-in-Process Inventory and Finished goods inventory remain unchanged. $ $ 2,000 Hence, the journal entry shall be passed as- Factory OH control Dr To Cost of Goods sold (To transfer over applied factory OH to jobs) $ 2,000 Hence the revised balances shall be Over applied OH (2000-2000) Cost of Goods sold (2980000-2000) Work-in-Process Inventory Finished Goods Inventory 29,78,000 1,71,000 2,49,000