Question

1. Pocono Cement Forms expects $800,000 in overhead during the next year. It does not know whether it should apply overhead on the basis of its anticipated direct labor hours of 50,000 or its expected machine hours of 25,000.

Determine the product cost under each predetermined allocation rate if the last job incurred $1,550 in direct material cost, 102 direct labor hours, and 85 machine hours. Wages are paid at $18 per hour.

Cost of Job

Labor Hours	Machine hours
	$

2. Job cost sheets show the following information:

Job	January		February		March		Completed		Sold
AA2	$2,700		$1,400				February		Not sold
AA4	4,837						January		February
AA5			3,270				February		March
AA3			3,410		$2,317		April		Not sold
Total	$7,537		$8,080		$2,317

What are the balances in the work in process inventory, finished goods inventory, and cost of goods sold for January, February, and March?

	Work in Process			Finished Goods			COGS
January		$			$
February								$
March

Answer 1

	Labor Hours	Machine Hours
Direct materials	$1,550	$1,550
Add: Direct labor (102 direct labor hours * $18 per hour)	$1,836	$1,836
Add: Overheads allocatted ($800,000/50,000*102); ($800,000/25,000*85)	$1,632	$2,720
Total Product Cost of the Job	$5,018	$6,106