Question

48.

Lauren Company uses a job-order costing system and a predetermined overhead rate based on machine hours. At the beginning of 2020, Lauren estimated the overhead for the year would be $720,000 and that production would use 90,000 machine hours. The following information relates to the month of August: Job 125 Job 126 Job 127 $10,000 $14,000 $0 $15.000 $20,000 $2.000 Work in process August 1 Direct materials cost Direct labor costs Actual direct labor hours Actual machine hours $24,000 $31.000 $7.500 2.000 3,000 650 1.500 2,200 800 Also known • Raw materials beginning inventory was $3.000. Purchases of raw materials for August are $40.000 Job 127 was started on B/25 Job 125 and 126 were shed on3/29 ob 125 sold on 8/31 • Finished goods beginning inventory on 8/1 was $45.000 • Actual overhead for August was $38.500 Please answer the following questions: 1. What is the predetermined overhead rate? 2. Was overhead over applied or under applied in August 3. By what amount was overhead over or under applied 4. What is the cost of goods manufactured for August? 5. What is the cost of goods sold for August? 6. What are prime costs for August? 7. What is the ending work in process balance on August 317 8. What is the ending finished goods inventory balance on August 317

Answer 1

1) Predetermine overhead rate= 720000/90000 = 8 per MH

2) Applied overhead is lower than actual overhead so it is under applied overhead

3) Applied overhead = (1500+2200+800)*8 = 36000

Actual overhead = 45000

Under applied overhead = 9000

4) Cost of goods manufactured for August = 24000+35000+55000+(3700*8) = 143600

5) Cost of goods sold for August = 10000+15000+24000+(1500*8) = 61000

6) Prime cost = 37000+62500 = 99500

7) Ending WIP = 2000+7500+(800*8) = 15900

8) Ending finished goods = 14000+20000+31000+(2200*8) = 82600