Question

Kansas Company uses a job costing accounting system for its production costs. The company uses a predetermined overhead rate based on direct labor-hours to apply overhead to individual jobs. The company prepared an estimate of overhead costs at different volumes for the current year as follows.

Direct labor-hours		150,000				180,000				210,000
Variable overhead costs	$	1,200,000			$	1,440,000			$	1,680,000
Fixed overhead costs		702,000				702,000				702,000
Total overhead	$	1,902,000			$	2,142,000			$	2,382,000

The expected volume is 180,000 direct labor-hours for the entire year. The following information is for March, when Jobs 6023 and 6024 were completed.

Inventories, March 1
Materials and supplies	$	31,500
Work‐in‐process (Job 6023)	$	165,000
Finished goods	$	333,500
Purchases of materials and supplies
Materials	$	411,000
Supplies	$	49,000
Materials and supplies requisitioned for production
Job 6023	$	133,000
Job 6024		115,000
Job 6025		77,000
Supplies		19,000
	$	344,000

Factory direct labor-hours (DLH)
Job 6023	9,500 DLH
Job 6024	8,500 DLH
Job 6025	6,500 DLH

  

Labor costs
Direct labor wages (all hours @ $9)	$	220,500
Indirect labor wages (12,000 hours)		48,000
Supervisory salaries		108,000
Building occupancy costs (heat, light, depreciation, etc.)
Factory facilities	$	19,500
Sales and administrative offices		7,500
Factory equipment costs
Power	$	13,000
Repairs and maintenance		3,500
Other		8,500
	$	25,000

Required:

a. Compute the predetermined overhead rate (combined fixed and variable) to be used to apply overhead to individual jobs during the year.

(Note: Regardless of your answer to requirement [a], assume that the predetermined overhead rate is $8 per direct labor-hour. Use this amount in answering requirements [b] through [e].)

b. Compute the total cost of Job 6023 when it is finished.

c. How much of factory overhead cost was applied to Job 6025 during March?

d. What total amount of overhead was applied to jobs during March?

e. Compute actual factory overhead incurred during March.

f. At the end of the year, Kansas Company had the following account balances:

  

Overapplied overhead	$	5,000
Cost of goods sold		3,040,000
Work-in-process inventory		112,000
Finished goods inventory		249,000

  

Assuming that the overapplied overhead is not material, show the new account balances in the following table.

B. Compute the total cost of Job 6023 when it is finished.

	The total cost of Job 6023 $

C. How much of factory overhead cost was applied to Job 6025 during March?

	Factory overhead cost of Job 6025 $

D.What total amount of overhead was applied to jobs during March?

	Total amount of overhead $

E. Compute actual factory overhead incurred during March.

	Actual factory overhead incurred $

Answer 1

Kansas Company
a)	Predermined Overhead Rate=Total Overhead/Direct Labor Hours
	Total Overhead=(A)	$ 21,42,000.00
	Direct Labor Hours=(B)	180000
	PRedermined Overhead Rate=(A)/(B)	$                11.90
b)	Total Cost of Job 6023
	Work in Process March 1st	$    1,65,000.00
	Direct Material Requistioned	$    1,33,000.00
	Direct Labor(9500*$9)	$       85,500.00
	Overhead cost(9500*$8)	$       76,000.00
	Total Cost of Job 6023	$    4,59,500.00
c )	Factory Overhead cost applied to Job 6025
	Direct Labor Hours of Job 6025=(A)	6500
	Predermined Overhead rate(given)=(B)	$                  8.00
	Factory Overhead cost applied to Job 6025=(A)*(B)	$       52,000.00
d)	Total Overhead applied to Jobs during March
	Total Direct Labor Hours(9500+8500+6500)	24500
	Predermined Overhead rate(Given)=(B)	$                  8.00
	Total Overhead applied to Jobs during March=(A)*(B)	$    1,96,000.00
e)	Actual Factory Overhead cost incurred during March
	Supplies	$       19,000.00
	Indirect labor wages	$       48,000.00
	Supervisory Salaries	$    1,08,000.00
	Factory Utilities	$       19,500.00
	Factory Equipment cost=($13000+$3500+$8500)	$       25,000.00
	Actual Factory Overhead cost incurred during March	$    2,19,500.00
f)	New Account Balances
	Overapplied Overhead	0
	Cost of goods sold($3040000-$5000)	$ 30,35,000.00
	Work in Process	$    1,12,000.00
	Finished Goods	$    2,49,000.00
	Overapplied overhead is adjusted in cost of goods sold.