Question

As of the end of June, the job cost sheets at Racing Wheels, Inc., show the following total costs accumulated on three custom jobs.

	Job 102			Job 103			Job 104
Direct materials	$	31,000		$	56,000		$	57,000
Direct labor		19,000			25,300			43,000
Overhead applied		7,410			9,867			16,770

Job 102 was started in production in May and the following costs were assigned to it in May: direct materials, $14,000; direct labor, $3,500; and overhead, $1,365. Jobs 103 and 104 were started in June. Overhead cost is applied with a predetermined rate based on direct labor cost. Jobs 102 and 103 were finished in June, and Job 104 is expected to be finished in July. No raw materials were used indirectly in June. Using this information, answer the following questions. (Assume this company’s predetermined overhead rate did not change across these months.)

1&2. Complete the table below to calculate the cost of the raw materials requisitioned and direct labor cost incurred during June for each of the three jobs?
3. Using the accumulated costs of the jobs, what predetermined overhead rate is used?
4. How much total cost is transferred to finished goods during June?

Answer 1

1) and 2)
Cost of raw materials requisitioned in June
Job 102				31000
Job 103				56000
Job 104				57000
Cost of raw materials requisitioned in June				144000
Direct labor cost incurred in June
Job 102				19000
Job 103				25300
Job 104				43000
Direct labor cost incurred in June				87300

3)
The predetermined overhead rate used in June
7410/19000
				39% of direct labor cost

4)
	job 102	job 103
Beginning work in progress	18865
Cost added during the year
Direct materials	31000	56000
Direct labor	19000	25300
Applied overhead	7410	9867
total cost added during the year	57410	91167
Total cost	76275	91167	167442
Total cost transferred to finished goods during June is 167442