Question

Saved Help Whitley Construction Company is in the home remodeling business. Whitley has three teams of highly skilled employees, each of whom has multiple skills involving carpentry, painting, and other home remodeling activities. Each team is led by an experienced employee who coordinates the work done on each job. As the needs of different jobs change, some team members may be shifted to other teams for short periods of time. Whitley uses a job costing system to determine job costs and to serve as a basis for bidding and pricing the jobs. Direct materials and direct labor are easily traced to each job using Whitley's cost tracking software Overhead consists of the purchase and maintenance of construction equipment, some supervisory labor, the cost of bidding for new customers, and administrative costs. Whitley uses an annual overhead rate based on direct labor hours. Whitley has recently completed work for three clients: Harrison, Barnes, and Tyler. The cost data for each of the three jobs are summarized below: Job Harrison Barnes Tyler Direct Materials $ 6,753 13,229 42,338 Direct Direct Labor Labor Hours Cost 45 $15,367 88 22,184 133 49,654 Budgeted direct materials cost and direct labor cost for the year are estimated at $450,000 and $600,000, respectively. Direct labor hours are budgeted at 22,500 hours, and total overhead is budgeted at $495,000 Required: 1. Calculate the total cost of each of the three jobs. 2. Suppose that for the entire year, Whitley used 23,800 labor hours and total actual overhead was $525,000. What is the amount of

Answer 1

OH rate per DLH:
Budgeted Overheads		4,95,000
Divide: Budgeted DLH	22,500
OH rate per DLH:		22	per DLH
Req 1.
Total cost of Jobs:
			Harrison	Barnes	Tyler
Material cost		6753	13229	42338
Labour cost		15367	22184	49654
Overheads applied @ 22 per DLH	990	1936	2926
Total cost			23110	37349	94918
Req 2.
Direct labour hours used		23,800
Multiply: Oh rate per DLH		22
Overheads applied			523600
Actual overheads incurred		525000
Under-applied overheads		1400