Question

The computer workstation furniture manufacturing that Santana Rey started in January is progressing well. As of the end of June, Business Solutions's job cost sheets show the following total costs accumulated on three furniture jobs.

	Job 602					Job 603					Job 604
Direct materials		$	1,600				$	3,700				$	3,100
Direct labor			700					1,380					1,600
Overhead			350					690					800

Job 602 was started in production in May, and these costs were assigned to it in May: direct materials, $500; direct labor, $250; and overhead, $125. Jobs 603 and 604 were started in June. Overhead cost is applied with a predetermined rate based on direct labor costs. Jobs 602 and 603 are finished in June, and Job 604 is expected to be finished in July. No raw materials are used indirectly in June. (Assume this company’s predetermined overhead rate did not change over these months.)

Required:
1. What is the cost of the raw materials used in June for each of the three jobs and in total?
2. How much total direct labor cost is incurred in June?
3. What predetermined overhead rate is used in June?
4. How much cost is transferred to finished goods inventory in June?

Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 What is the cost of the raw materials used in June for each of the three jobs and in total? Job 602 Job 603 Job 604 Total May costs June costs Total < Required 1 Required 2 >

Answer 1

Predetermined overhead rate is computed by dividing overhead of Job 602 by direct labor of Job 602

a		Job 602	Job 603	Job 604	Total
	May costs	500			500
	June costs (Bal)	1100	3700	3100	7900
	Total	1600	3700	3100	8400
b		Job 602	Job 603	Job 604	Total
	May costs	250			250
	June costs (Bal)	450	1380	1600	3430
	Total	700	1380	1600	3680
c	Predetermined overhead rate = 350/700 = 50%

d	Job	Raw materials	Direct labor	overhead	Total cost	Cost transferred to finished goods	Costs of ending WIP
	602	1600	700	350	2650	2650
	603	3700	1380	920	6000	6000
	604	3100	690	800	4590		4590
					Total	8650	4590