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 Variable overhead costs Fixed overhead costs Total overhead 150,000 $1,050,000 612,000 $1,662,000 180,000 $1,260,000 612,000 $1,872,000 210,000 $1,470,000 612,000 $2,082,000 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. $ 32,000 $165,000 $ 339,500 Inventories, March 1 Materials and supplies Work-in-process (Job 6023) Finished goods Purchases of materials and supplies Materials Supplies Materials and supplies requisitioned for production Job 6023 Job 6024 Job 6025 Supplies $398,000 $ 49,000 $ 138,000 117,500 80,000 19,000 $ 354,500 Factory direct labor-hours (DLH) Job 6023 Job 6024 Job 6025 10,500 DLH 10,000 DLH 6,500 DLH $243,000 57,600 113,000 Labor costs Direct labor wages (all hours @ $9) Indirect labor wages (12,000 hours) Supervisory salaries Building occupancy costs (heat, light, depreciation, etc.) Factory facilities Sales and administrative offices Factory equipment costs Power Repairs and maintenance Other $ 20,000 7,500 $ 12,000 4,000 7,000

Answer 1

Solutions:

9 Solution a: Computation of Predetermined Overhead rate Total overhead Direct labor hours 1872000 180000 12 13 14 Predetermined overhead rate 10.40 16 17 18 Solution b: Computation of Total Cost of Job 6023 Work in process, March 1 Add: Materials requisitioned Add: Direct labor(10500*$9) Add: Overehead cost (10500*$8) 19 165000 138000 94500 84000 20 21 I 22 23 Total cost of Job 6023 481500 24 25 26 Solution c: Factory Overhead cost applied to Job 6025 Direct labor hours of Job 6025 27 6500 28 * Predetermined Overhead rate 29 Factory overhead cost applied to Job 6025 52000 30 31 32 33 Solution d: Total overhead applied to Jobs during March Total Direct labor hours (10500+10000+6500) *Predetermined Overhead rate Factory overhead cost applied to Job 6025 27000 34 35 36 216000 27 -) Sheet239 Sheet49 (6) Sheet49 (5) Sheet217 She

36 37 38 39 40 41 Solution e: Computation of actual factory overhead incurred Supplies 19000 Indirect labor wages 57600 Supervisory salaries 113000 Factory facilities 20000 Factory Equipment costs (12000+4000+7000) 23000 43 44 45 46 Total actual factory overhead incurred 232600 47 48 50 51 Solution f: New Account Balances Overapplied Overhead Cost of goods sold ($2850000-$3000)* 2847000 Work in process inventory 111000 Finished goods inventory 241000 *as overapplied overhead is not material, so adjusted with only cost of goods sold 53 54 56 57 58 59 60 61 62 63 64 65 66 -) Sheet239 Sheet49 (6) Sheet49 (5) Sheet217 She