Question

Marcelino Co.'s March 31 inventory of raw materials is $90,000. Raw materials purchases in April are $510,000, and factory payroll cost in April is $381,000. Overhead costs incurred in April are: indirect materials, $53,000; indirect labor, $25,000; factory rent, $36,000; factory utilities, $24,000; and factory equipment depreciation, $55,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $655,000 cash in April. Costs of the three jobs worked on in April follow. Job 306 Job 307 Job 308 $ 28,000 24,000 12,000 $ 37,000 15,000 7,500 Balances on March 31 Direct materials Direct labor Applied overhead Costs during April Direct materials Direct labor Applied overhead Status on April 30 133,000 100,000 215,000 152,000 $110,000 104,000 Finished (sold) Finished (unsold) In process

Answer 1

There is under applied OH to the extent of $15000 and this needs to be charged to COGS once the WIP is completed. until then it will be kept in Factory over head. in the given scenario since the Job 306 and 307 is complete, under applied OH can be charged to COGS

Even though we have the value of Finished goods in Job 306, to arrive at COGS, we need to know profit margin included in finished goods

once we deduct profit margin, we can arrive at COGS

From March		Job 306		Job 307		Job 308		Total
Direct Materials		28,000		37,000				65,000
Direct Labour		24,000		15,000				39,000
Applied overhead		12,000		7,500				19,500
Opening WIP		64,000		59,500				123,500
From April
Direct Materials		133,000		215,000		110,000		458,000
Direct Labour		100,000		152,000		104,000		356,000
Applied overhead		50,000		76,000	-	52,000		178,000
Total cost added in april		283,000		443,000		266,000		992,000
Total cost for April'30		347,000		502,500		266,000		1,115,500
Finished Goods		655,000
Under applied OH to be applied to COGS		4,213		6,404		4,382		15,000
Total Over head costs
Indirect Materials	53,000
Indirect Labour	25,000
factory Rent	36,000
Factory Utilities	24,000
Depreciation	55,000
Total OH	193,000
Applied OH	178,000
Under applied OH to be applied to cost of goods sold	15,000