Question

On August 1, Cairle Company’s work-in-process inventory consisted of three jobs with the following costs:

	Job 70	Job 71	Job 72
Direct materials	$1,700	$2,000	$850
Direct labor	1,900	1,200	900
Applied overhead	1,330	840	630

During August, four more jobs were started. Information on costs added to the seven jobs during the month is as follows:

	Job 70	Job 71	Job 72	Job 73	Job 74	Job 75	Job 76
Direct materials	$800	$1,235	$3,600	$5,000	$300	$560	$80
Direct labor	1,000	1,400	2,200	1,800	600	900	180

Before the end of August, Jobs 70, 72, 73, and 75 were completed. On August 31, Jobs 72 and 75 were sold.

Required:

1. Calculate the predetermined overhead rate based on direct labor cost.
% of direct labor cost.

2. Calculate the ending balance for each job as of August 31.

	Ending Balance
Job 70	$
Job 71	$
Job 72	$
Job 73	$
Job 74	$
Job 75	$
Job 76	$

3. Calculate the ending balance of Work in Process as of August 31.
$

4. Calculate the cost of goods sold for August.
$

5. Assuming that Cairle prices its jobs at cost plus 30 percent, calculate Cairle’s sales revenue for August.
$

Answer 1

1) Predetermine overhead rate = 1330/1900 = 70% of labor cost

2) Job Cost Sheet

	Job 70	Job 71	Job 72	Job 73	Job 74	Job 75	Job 76
Beginning balance	4930	4040	2380
Direct material	800	1235	3600	5000	300	560	80
Direct labor	1000	1400	2200	1800	600	900	180
Overhead	700	980	1540	1260	420	630	126
Total	7430	7655	9720	8060	1320	2090	386

3) Ending WIP = 7655+1320+386 = 9361

4) Cost of goods sold = 9720+2090 = 11810

5) Sales revenue = 11810*1.3 = $15353