Question

Applying Overhead in a Service Company: Journal Entries (L04, LOS, LOB] Vista Landscaping uses a job-order costing system to track the costs of its landscaping projects The company provides garden design and installation services for its clients. The table below provides data concerning the three landscaping projects that were in progress during April. There was no work in process at the beginning of April Project Harris Chan James Designer- hours 120 100 90 Actual overhead costs were $30,000 for April. Overhead costs are applied to projects on the basis of designer-hours because most of the overhead is related to the costs of the garden design studio. The predetermined overhead rate is $90 per designer-hour. The Harris and Chan projects were completed in April, the James project was not completed by the end of the month. Required: 1. Compute the amount of overhead cost that would have been charged to each project during April 2. Prepare a journal entry showing the completion of the Harris and Chan projects and the transfer of costs to the Completed Projects (i.e., Finished Goods) account 3. What is the balance in the Work in Process account at the end of the month? 4. What is the balance in the Overhead account at the end of the month? What is this balance called? Designer materials cost $4,500 $3,700 $1,400 Direct labor cost 89,600 $8,000 $7,200

Answer 1

Answer 1

Harris Chan James Designer-hours 120 100 Predetermined overhead rate * $90 * $90 * $90 Manufacturing overhead applied $10,800 $9,000 $8,100

Answer 2

Completed Projects 45,600* Work in Process 45,600*

calculations:

Harris Chan Direct materials $ 4,500 Direct labor 9,600 8,000 Overhead applied 10,800 9,000 Total cost $24,900 $20,700

Answer 3

Direct materials $ 1,400 Direct labor 7,200 Overhead applied 8,100 Total cost in work in process $16,700

Answer 4

Overhead Actual overhead costs 30,000 27,900 Applied overhead costs Underapplied overhead 2,100

In case of any doubt, please comment.