Question

Moor Company uses a job-order costing system and applies overhead costs to jobs at a rate of 120% of direct labor cost. Moor Company started the month of June with three jobs in process. The cost of beginning work in process plus the costs added during June are shown below: beginning work in process Job #1-A $3,250 Job #3-G $2,690 Job #7-L $3,720 COSTS ADDED DURING JUNE: direct materials direct labor ..... $4,680 3,530 $3,950 4,180 $2,870 2,410 During June, Moor Company completed and sold Job #1-A. Job #3-6 was also completed but was not sold by the end of June. Job #7-L was not completed by the end of June. Moor Company's cost of goods sold for June after the overhead variance was closed totaled $16,290. Calculate Moor Company's actual overhead cost for the month of June.

Answer 1

It is given that Job #1-A was completed and sold during June. Therefore, cost of goods sold for the month includes cost of Job#1-A after closing all overhead variances thereon. In simple words, difference between cost of goods sold after closing all variances and total cost of Job#1-A recorded shall be the variance in overhead cost. Job #1-A Job #3-G Job #7-L Beginning work in process $3,250 $2,690 $3,720 Costs added during June: Direct materials $4,680 $3,950 $2,870 Direct labor $3,530 $4,180 $2,410 --> (a) Overhead applied $4,236 $5,016 $2,892 --> (a) x 120% Total costs recorded including beginning WIP $15,696 $15,836 $11,892 Overhead cost after closing overhead variance $16,290 Overhead variance closed to cost of goods sold $594 [$16290 - $15696] 236 Above table shows detailed discussion on calculating overhead variance closed to cost of goods sold during June. Actual overhead cost for the month of June should be equal to overhead cost applied plus overhead variance closed to cost of goods sold during the month. Therefore, Total overhead cost applied during the month of June Add: Overhead cost after closing overhead variance Actual overhead cost for June month shall be $12,144 ($4236 + $5016 + $2892] $594 [As calculated above] $12,738