Question

Exercise 15-12 Don Lieberman and Associates, a CPA firm, uses job order costing to capture the costs of its audit jobs. There were no audit jobs in process at the beginning of November. Listed below are data concerning the three audit jobs conducted during November Direct materials Auditor labor costs Auditor hours Lynn $610 $5,500 Brian Brian $410 $6,700 Mike $210 $3,475 46 73 Overhead costs are applied to jobs on the basis of auditor hours and the predetermined overhead rate is $51 per auditor hour. The Lynn job is the only incomplete job at the end of November, Actual Overhead for the month was $12,100. (a) Determine the cost of each job. Cost Lynn Brian Mike (b) Indicate the balance of the Service Contracts in Process account at the end of November. Balance in service contracts in process account (c) Calculate the ending balance of the Operating Overhead account for November. Balance in operating overhead account

Answer 1

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(a)	Lynn	=	$         9,833
	Brian	=	$       11,649
	Mike	=	$         6,031
	Workings:
		Lynn	Brian	Mike
	Direct material	$             610	$             410	$           210
Add:	Auditor labor cost	$         5,500	$         6,700	$       3,475
Add:	Overhead cost	$         3,723	$         4,539	$       2,346
	Total cost	$         9,833	$       11,649	$       6,031
		Lynn	Brian	Mike	Total
(i)	Auditors hours	73	89	46
(ii)	Predetermined overhead rate	$               51	$               51	$             51
(i) X (ii)	Overhead cost	$         3,723	$         4,539	$       2,346	$ 10,608
(b)	Balance in service contracts in process account	=	$         9,833
	As only the Lynn job is incomplete , therefore Balance in service contracts in process account is equal to the Total cost of Lynn
(c)	Balance in operating overheads account	=	$         1,492
	Workings:
	Actual overheads for the month	=	$       12,100
Less:	Applied overheads in the month	=	$       10,608
	Balance in operating overheads account	=	$         1,492