Question

Job Custs Using Plantwide Overhead Rate Naranjo Company designs industrial prototypes for outside companies. Budgeted averhead for the year was $333,500, and budged direct labor hours were 19.000. The average wage rate for direct labar is expected to be $35 per hour. During June, Naranja Company warked on our jobs. Data relating to these four jobs to low Job 42 Job 39 $22,300 Job 40 Job 41 $35,803 $15,000 $400 Reginning balance Materials requisitioned 20,400 11,000 15,400 19,600 10,700 Direct bar cost 17.500 6,550 6,300 Overhead is assigned as a percentage of direct later cust. During June, Jobs 39 and 40 were completed; Job 39 was sold at 125 percent of cost. Naranjo had original developed lot 40 tu order for a bustumer; however, the customer was near benkruptcy and the chance of Naranjo being paid was growing dimmer. Naranjo decided to hold 200 40 in inventory while the customer worked out its finarcial difficulties. Jcb 40 is the only fob in Finished Goods Inventory.) Jobs 41 and 42 remain unfinished at the end of the month. Required: 1. Calculate the overhead rate based on direct labor cost. % of direct abor cost 2. Set up a simple job-order cost sheet for all jobs in process during June. Naranjo Company Job-Order Cost Sheets Job 39 Job 40 Job 41 Job 42 Balance, June 1 Total 3. What if the expected direct labor rate at the beginning of the year was $20 instead of $35? What would the overhead rate be? If required, round your overhead rate answer to one decimal place. Now budgetod direct labor cost- New overhead rate of direct sbor cost How would the cost of the jobs be affected?

Answer 1

Requirement 1 :

50% of direct labor cost

Working:

Budgeted direct labor cost:
Average Wage rate for direct labor	$                  35
Budgeted direct labor hours	19000
	$       665,000
Overhead Rate:
Budgeted overhead costs	$       332,500
Budgeted direct labor cost	$       665,000
	50%

Requirement 2:

Naranjo company
Job-Order Cost sheets
	Job 39	Job 40	Job 41	Job 42
Beginning Balance (A)	$          22,300	$      35,800	$      15,900	$            400
Material Requisition(B)	$          19,600	$      20,400	$      11,900	$      15,400
Direct labor cost ( C )	$          10,700	$      17,500	$         6,550	$         6,300
Applied overhead (D) = ( C)*50%	$            5,350	$         8,750	$         3,275	$         3,150
Total Cost (A)+(B)+( C)+(D)	$          57,950	$      82,450	$      37,625	$      25,250

Requirement 3:

New budgeted direct labor cost = $ 532,000

Over head rate = 63% of direct labor cost

The cost of jobs would increase due to the change

Working:

New Budgeted direct labor cost:
Average Wage rate for direct labor	$                  28
Budgeted direct labor hours	19000
	$       532,000
New Overhead Rate:
Budgeted overhead costs	$       332,500
Budgeted direct labor cost	$       532,000
	63%