4-33
Dollars Company uses a job costing system that applies factory overhead on the basis of
direct labor. No job was in process on February 1. During the month of February, the
company worked on these three jobs. During the month, the company completed and
transferred Job A23 to the finished goods inventory. Jobs C76 and G15 were not
completed and remain in work in process at the cost of $148,650 at the end of the month.
Actual factory overhead costs during the month totaled $48,600.
Direct labor ($8/hour)
Direct materials
Overhead applied
Job Number
A23
C76
$24,000
?
$42,000
$61,000
?
$24,750
G15
$8,800
?
$6,050
Required
1. What is the predetermined factory overhead rate?
2. Compute the amount of underapplied and overapplied overhead for February.
3. Compute the cost of direct materials issued to production during the month.
4-35
Norton Associates is an advertising agency in Columbus, Ohio. The company's
controller estimated that it would incur $325,000 in overhead costs for 2010. Because the
overhead costs of each project change in direct proportion to the amount of direct
professional hours incurred, the controller decided that overhead should be applied on the
basis of professional hours. the controller estimated 25,000 professional hours for the
year. During October, Norton incurred the following costs to make a 20-second TV
commercial for Central Ohio Bank. Actual overhead costs to make the commercial
totaled $14,700. The industry customarily bills customers at 150 percent of total cost.
Direct Materials
Direct professional hours
Cost per professional hour
Estimated overhead costs
Estimated professional hours
Actual overhead costs for commercial
Billing rate on cost
$32,000
1,200
$50
$325,000
25,000
$16,500
150%
Required
1. Compute the predetermined overhead rate.
2. What is the total amount of the bill that Norton will send Central Texas Bank?
4-40
The following information is for Shiller Company for July 2010:
Facts and Figures about Shiller Company March 2010 Jobs:
Job
1467
Job
1469
Predetermined
Labor Hour Rate
39.50
Labor
Hours:
6,175
39.50
4,275
Status:
Completed
Ship
Date:
July
Gross
Margin:
24%
In Process
NA
NA
The company purchased the following direct materials and indirect materials:
Material A
Material B
Indirect Materials
TOTAL:
$76,000
$57,000
$14,250
$147,250
Direct materials and indirect materials used are as follows:
Material A
Material B
Subtotal:
Indirect Materials
TOTAL:
Job 1467
$28,500
$9,500
$38,000
Job 1469
$71,250
$33,250
$104,500
TOTAL
$99,750
$42,750
$142,500
$199,500
$342,000
Factory labor incurred for the two jobs and indirect labor is as follows:
Job 1467
$76,000
Job 1469
$57,000
Indirect Labor
$133,000
TOTAL:
$266,000
The company closed the overapplied or underapplied overhead to the Cost of Goods Sold
account at the end of July.
Required
1. Calculate the amount of overapplied and underapplied overhead and state
whether the cost of goods sold account will be increased or decreased by the
adjustment.
2. Calculate the total manufacturing cost for Job 1467 and Job 1469 for July 2010.
Chapter 4
4-33 Working with Unknowns
1. From Job G15: $6,050/$8,800 = 0.6875 overhead rate
2. Job A23: $24,000 x 0.6875 = $16,500 applied overhead
Total applied overhead:
A23
$16,500
C76
24,750
G15
6,050
$47,300
$48,600 - $47,300 = $1,300 underapplied overhead
3. For Job C76:
$24,750 / .6875 = $36,000 direct labor
Therefore, $148,650 - ($36,000 + $61,000 + $24,750) –
($8,800 + $6,050)
= $12,050 direct materials for Job G15
$42,000 + $61,000 + $12,050
= $115,050 cost of direct materials issued
4-35 Service Industry; Overhead Rate, Pricing
1. Predetermined Overhead Rate = $325,000 / 25,000 hours
= $13 per professional hour
2. Total Cost = $32,000 + ($50 x 1,200) + ($13 x 1,200)
= $32,000 + $60,000 + $15,600 = $107,600
Total Revenue = $107,600 x 150% = $161,400
1
Chapter 4
4-40 Job Costing
1. Underapplied OH = $31,350
2. Total Mfg cost for Job 1467= $357,913; for Job 1469 = $330,363
Dire ct
Ma te ria ls
Data Section
Job 1467
Material A
$
Material B
Dire ct
La bor
La bor Hours
$
76,000
6,175
$
57,000
4,275
28,500
9,500
Job 1469
Material A
$
Material B
71,250
33,250
10,450
Fa ctory Ove rhe a d Applie d
$39.50
per machine hr
Solution
Fa ctory Ove rhe a d Ana lysis
Actual Factory OH
Indirect Materials
Indirect Labor
$199,500
133,000
Utilities
14,250
Depreciation
85,500
Insurance
Tota l Actua l Fa ctory OH
Less: Applied Factory OH
11,875
$444,125
412,775
(10,450 x $39.50)
Unde r/ove ra pplie d Fa ctory OH
$31,350 UNDERAPPLIED
Adjust Diffe re nce to COGS
31,350
Incre a se in Cost of Goods Sold
Breakdown of Job Costs
Job 1467
Tota l Dire ct Ma te ria ls Cost
Tota l Dire ct La bor Cost
!"#$%
Job 1469
$38,000
$104,500
76,000
57,000
Applie d Ove rhe a d
Ma chine Hours
6,175
4,275
Applica tion ra te
$39.50
$39.50
Tota l Applie d Ove rhe a d Cost
243,913
168,863
Tota l Ma nufa cturing Costs
$357,913
$330,363
2
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