Question

Assume the following information related to the Alexis Company for the month of November 2019:

	Job No. 123	Job No. 124	Job No. 125	Job No. 126	Job No. 127
In process, Nov. 1
Materials	P20,000	P30,000	P90,000	0	0
Labor	P70,000	P40,000	P100,000	0	0
Overhead	P84,000	P48,000	P120,000	0	0
Cost added in November
Materials	P70,000	P40,000	P60,000	P60,000	P60,000
Labor	P80,000	P60,000	P100,000	P70,000	P70,000
Overhead	?	?	?	?

Actual overhead incurred in November amounted to P636,000. Job No. 123 and 124 were completed in November.

Job No. 124 remains unsold by the end of the month.

Overhead is applied using a predetermined overhead rate.

The overhead variance is allocated to Cost of Goods sold and the appropriate inventories.

Given the following information, compute the following:

1. The amount of overhead applied to production in November assuming no change in the overhead rate used
2. The cost of the goods completed and transferred to finished goods inventory
3. The cost of the finished goods inventory ending after adjustment
4. The cost of the Nov. 1 Work in process inventory
5. The cost of Goods sold unadjusted
6. The cost of the November 30 work in process inventory after adjustment
7. Cost of goods sold adjusted

Show computation for each number.

Answer 1

Overhead rate = $84000 / 70000 = 120% of Direct Labor Cost

	Job No. 123	Job No. 124	Job No. 125	Job No. 126	Job No. 127	Total
In process, Nov. 1
Materials	20,000	30,000	90,000	-	-	140,000
Labor	70,000	40,000	100,000	-	-	210,000
Overhead	84,000	48,000	120,000	-	-	252,000
Cost added in November
Materials	70,000	40,000	60,000	60,000	60,000	290,000
Labor	80,000	60,000	100,000	70,000	70,000	380,000
Overhead	96,000	72,000	120,000	84,000	84,000	456,000
Total	420,000	290,000	590,000	214,000	214,000	1,728,000

1. The amount of overhead applied to production in November = 456,000
2. The cost of the goods completed and transferred to finished goods inventory = 710,000
3. The cost of the finished goods inventory ending after adjustment = 320,208
4. The cost of the Nov. 1 Work in process inventory = 602,000
5. The cost of Goods sold unadjusted = 420,000
6. The cost of the November 30 work in process inventory after adjustment = 1,124,042
7. Cost of goods sold adjusted = 463,750

Underallocated Overhead = $636000 - 456000 = 180000

	Unadjusted Balance	Adjustment	Adjusted Balance
Cost of Goods Sold	420,000	43,750	463,750
Work in process Inventory	1,018,000	106,042	1,124,042
Finished Goods Inventory	290,000	30,208	320,208
Total	1,728,000		1,908,000

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