Question

Predetermined Overhead Rate, Application of Overhead to Jobs, Job Cost, Unit Cost 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 $850 Direct labor 1,900 1,94 $2,000 1,200 960 900 Applied overhead 1,520 720 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 1,000 $1,235 1,400 $3,500 2,200 $5,000 1,800 $300 600 $560 850 $80 180 Direct labor 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. Predetermined overhead rate based on Direct Labor cost

Predetermined overhead rate = Applied Overhead / Direct Labor cost = $1,520 / $1,900 = 80% of Direct Labor cost

2. Ending Balance for each Job

Job 70 = $1,700 + $1,900 + $1,520 + $800 +$1,000 + (80% of $1,000)

             = $6,920 + $800

             = $7,720

Job 71 = $2,000 + $1,200 + $960 + $1,235 + $1,400 + (80% of $1,400)

             = $6,795 + $1,120

             = $7,915

Job 72 = $850 + $900 + $720 + $3,500 + $2,200 + (80% of $2,200)

             = $8,170 + $1,760

             = $9,930

Job 73 = $5,000 + $1,800 + (80% of $1,800)

             = $8,240

Job 74 = $300 + $600 + (80% of $600)

             = $1,380

Job 75 = $560 + $850 + (80% of $850)

              = $2,090

Job 76 = $80 + $180 + (80% of $180)

             = $404

3. Ending Balance of work in process on August 31

Job 70, 72 , 73 , 75 are completed. So, they are transferred to finished goods

Job 71,74, 76 are still in work in process

Ending Balance of work in process = Ending Balance of Job 71 + Job 74 + Job 76

                                                                 = $7,915 + $1,380 + $404

                                                                 = $9,699

4. Cost of goods sold for August 31

As on August 31, Job 72 and 75 are sold

Cost of goods sold for August 31 = Cost of goods sold of Job 72 + Job 75                

                                                             = $9,930 + $2,090

                                                             = $12,020

5. Sales revenue for August

The selling price charged is Cost plus 30%

So, the sales revenue = $12,020 + ($12,020 * 30%)

                                          = $12,020 + $3,606

                                           = $15,626