Question

A. Manufacturing cost data for Orlando Company, which uses a job order cost system, are presented below.

Indicate the missing amount for each letter. Assume that in all cases manufacturing overhead is applied on the basis of direct labor cost and the rate is the same. (Round overhead rate to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 5,275.)

		Case A			Case B			Case C
Direct materials used		$enter a dollar amount	(a)		$92,000			$64,150
Direct labor		52,000			146,900			enter a dollar amount	(h)
Manufacturing overhead applied		31,200			enter a dollar amount	(d)		enter a dollar amount	(i)
Total manufacturing costs		146,950			enter a dollar amount	(e)		217,750
Work in process 1/1/17		enter a dollar amount	(b)		19,400			19,100
Total cost of work in process		208,900			enter a dollar amount	(f)		enter a dollar amount	(j)
Work in process 12/31/17		enter a dollar amount	(c)		16,900			enter a dollar amount	(k)
Cost of goods manufactured		193,900			enter a dollar amount	(g)		223,200

B. Don Lieberman and Associates, a CPA firm, uses job order costing to capture the costs of its audit jobs. There were no audit jobs in process at the beginning of November. Listed below are data concerning the three audit jobs conducted during November.

		Lynn		Brian		Mike
Direct materials		$710		$430		$250
Auditor labor costs		$5,800		$7,400		$3,575
Auditor hours		78		91		51

Overhead costs are applied to jobs on the basis of auditor hours, and the predetermined overhead rate is $55 per auditor hour. The Lynn job is the only incomplete job at the end of November. Actual overhead for the month was $14,000.

(a) Determine the cost of each job.

		Cost
Lynn		$
Brian		$
Mike		$

(b) Indicate the balance of the Service Contracts in Process account at the end of November.

Balance in service contracts in process account

$

(c) Calculate the ending balance of the Operating Overhead account for November.

Balance in operating overhead account

$

Answer 1

Answer to Question A.

Case A:
Total Manufacturing Costs = Direct Materials used + Direct Labor + Manufacturing Overhead applied
$146,950 = Direct Materials used + $52,000 + $31,200
Direct Materials used = $63,750

Total Cost of Work in Process = Total Manufacturing Costs + Work in process 1/1/17
$208,900 = $146,950 + Work in process 1/1/17
Work in process 1/1/17 = $61,950

Cost of Goods Manufactured = Total Cost of Work in Process - Work in process 12/31/17
$193,900 = $208,900 - Work in process 12/31/17
Work in process 12/31/17 = $15,000

Manufacturing Overhead Rate = $31,200 / $52,000 * 100
Manufacturing Overhead Rate = 60% of Direct Labor Cost

Case B:
Manufacturing Overhead applied = 60% of Direct Labor Cost
Manufacturing Overhead applied = $146,900 * 60%
Manufacturing Overhead applied = $88,140

Total Manufacturing Costs = Direct Materials used + Direct Labor + Manufacturing Overhead applied
Total Manufacturing Costs = $92,000 + $146,900 + $88,140
Total Manufacturing Costs = $327,040

Total Cost of Work in Process = Total Manufacturing Costs + Work in process 1/1/17
Total Cost of Work in Process = $327,040 + $19,400
Total Cost of Work in Process = $346,440

Cost of Goods Manufactured = Total Cost of Work in Process - Work in process 12/31/17
Cost of Goods Manufactured = $346,440 - $16,900
Cost of Goods Manufactured = $329,540

Case C:
Let the Direct Labor Cost be “$x”
Manufacturing Overhead Applied will be $x * 60% = $0.60x

Total Manufacturing Costs = Direct Materials used + Direct Labor + Manufacturing Overhead applied
$217,750 = $64,150 + $x + $0.60x
$153,600 = $1.60x
x = $96,000

Direct Labor = $96,000

Manufacturing Overhead applied = $96,000 * 60%
Manufacturing Overhead applied = $57,600

Total Cost of Work in Process = Total Manufacturing Costs + Work in process 1/1/17
Total Cost of Work in Process = $217,750 + $19,100
Total Cost of Work in Process = $236,850

Cost of Goods Manufactured = Total Cost of Work in Process - Work in process 12/31/17
$223,200 = $236,850 - Work in process 12/31/17
Work in process 12/31/17 = $13,650