Question

Sigma Corporation applies overhead cost to jobs on the basis of direct labor cost. Job V, which was started and completed during the current period, shows charges of $5,700 for direct materials, $9,600 for direct labor, and $5,376 for overhead on its job cost sheet. Job W, which is still in process at year-end, shows charges of $2,900 for direct materials and $4,100 for direct labor.

Check my work 3 Required: la. Should any overhead cost be applied to Job W at year-end? O Yes 20 points O No eBook 1b. How much overhead cost should be applied to Job W? Print References Overhead cost 2. How will the costs included in Job W's job cost sheet be reported within Sigma Corporation's financial statements at the end of the year? ORaw Materials OWork-in-Process O Finished Goods

Answer 1

Requirement (1)(a) – “YES”. The overhead shall be applied to Job-W at the year-end.

Requirement (1)(b) – The overhead cost to be applied to Job-W

Here, $5,376 of the overhead applied to the Job-V on the basis of the $9,600 pf the Direct Labor Cost incurred on Job-V, which is 56.00% of the Direct Labor Cost [($5,376 / $9,600) x 100].

Therefore, the overhead cost to be applied to Job-W will be 56.00% of the total direct labor cost for Job-W.

Hence, the overhead cost to be applied to Job-W = Total Direct Labor cost x Overhead Percentage Rate

= $4,100 x 56.00%

= $2,296

“The overhead cost to be applied to Job-W = $2,296”

Requirement (2) – The costs to be included in Job W’s job cost sheet be reported within Sigma Corporation’s financial statements is as follows

The direct materials for $2,900, the Direct labor for $4,100 and the applied factory overhead for $2,296 for Job-W shall be included in the Work in Process (WIP).