Question

Johnson Inc. is a job-order manufacturing company that uses a predetermined overhead rate based on direct labor hours to apply overhead to individual jobs. For the current year, estimated direct labor hours are 81,000 and estimated factory overhead is $486,000. The following information is for September of the current year. Job A was completed during September, and Job B was started but not finished. September 1, inventories Materials inventory $ 9,200 Work-in-process inventory (All Job A) 34,600 Finished goods inventory 75,500 Material purchases 129,500 Direct materials requisitioned Job A 82,000 Job B 42,000 Direct labor hours Job A 5,900 Job B 2,400 Labor costs incurred Direct labor ($8.00/hour) 66,400 Indirect labor 15,200 Supervisory salaries 7,700 Rental costs Factory 8,700 Administrative offices 3,500 Total equipment depreciation costs Factory 10,050 Administrative offices 4,150 Indirect materials used 13,700 Required: 1. What is the total cost of Job A? 2. What is the total factory overhead applied during September? 3. What is the overapplied or underapplied overhead for September?

Answer 1

1)	Job A	Job B	Total
Direct materials requisitioned	$82,000	$42,000	$124,000
Direct labor hours (5,900 * $8); (2,400 * $8)	$47,200	$19,200	$66,400
Factory overheads ($486,000/81,000 = $6 * 5,900); (2,400 * $6)	$35,400	$14,400	$49,800
Total Cost	$164,600	$75,600	$240,200
Therefore, the total cost of Job A is $164,600.
2)	Job A	Job B	Total
Factory overheads ($486,000/81,000 = $6 * 5,900); (2,400 * $6)	$35,400	$14,400	$49,800
Therefore, total factory overhead applied during September is $49,800.
3)	Total
Indirect labor	$15,200
Supervisory salaries	$7,700
Rental costs - Factory	$8,700
Rental costs - Administrative office	$3,500
Depreciation costs - Factory	$10,050
Depreciation costs - Administrative office	$4,150
Indirect materials	$13,700
Total overheads incurred	$63,000
Overheads applies	$49,800
Underapplied overheads ($63,000 - $49,800)	$13,200