Question

Job Casts Using a Plantwide Overhead Rate Naranjo Company designs Industrial prototypes for outside companies. Budgeted overhead for the year was $262,500, and budgeted direct labor hours were 21,000. The average wage rate for direct labor is expected to be $25 per hour. During June, Naranjo Company worked on four jobs. Data relating to these four jobs follow: Job 39 Job 40 Job 41 Job 42 Beginning balance $26,200 $34,500 $15,700 $400 Materials requisitioned 16,100 22,600 12,300 15,800 Direct labor cost 7,200 19,700 6,950 6,700 Overhead is assigned as a percentage direct labor cost. During June, Jobs 39 and 40 were completed; Job 39 was sold at 110 percent of cost. (Naranja had originally developed Jab 40 to order for a customer; hawever, that customer was near bankruptcy and the chance of Naranjo being paid was growing dimmer. Naranjo decided to hold Job 40 in inventory while the customer worked out its financial difficulties. Jab 40 is the only jab in Finished Goods Inventory.) Jobs 41 and 42 remain unfinished at the end of the month. Required: 1. Calculate the balance in Work in Process as of June 30. 2. Calculate the balance Finished Goods as of June 30. $ 3. Calculate the cost of goods sold for Junc. 4. Calculate the price charged for Job 39. Round your answer to the nearest cent. $ 5. What if the customer for Job 40 was able to pay for the job by June 30? What would happen to the balance in Finished Goods? What would happen to the balance of Cost of Goods Sold?

Answer 1

Solution:

Solution 1 Balance of Work in Process as of June 30 Amount Total Cost for Job 41 38,425 Total Cost for Job 42 26,250 Balance of work in process 64,675 N Balance of Finished Goods as of June 30 Amount Total Cost for Job 40 86,650 Balance of Finished Goods 86,650 3 Cost of goods sold for June Total Cost for Job 39 Cost of Goods sold Amount 53,100 53,100 4 Sale Price charged for Job 39 Total Cost for Job 39 Add: 10% of the cost Balance of work in process Amount 53,100 5,310 58,410

Solution: 5

What if the customer for Job 40 was able to pay for the job by June 30:

A. Finished Goods would decrease

B. Cost of Goods sold would increase++

Working:

Beginning balance Material requisitioned Direct labor cost Applied Overhead Total cost Job 39 Job 40 Job 41 Job 42 Sold Finished Goods Work in Process Work in Process 26,200 34,500 15,700 400 16,100 22,600 12,300 15,800 7,200 19,700 6,950 6,700 3,600 9,850 3,475 3,350 53,100 86,650 38,425 26,250 Calculation of Overhead Applied rate Total Budgeted Direct Labor cost = 21,000 Hrs * $25 = $525,000 Total Budgeted Overhead = $262,500 Overhead Application rate = $262,500 / $525,000 = 50% of Direct Labor cost