Question

# Exercise 2-3 Analysis of cost flows LO C2 As of the end of June, the job...

Exercise 2-3 Analysis of cost flows LO C2

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 \$ 25,000 \$ 48,000 \$ 64,000 Direct labor 13,000 26,900 39,000 Overhead applied 4,810 9,953 14,430

Job 102 was started in production in May and the following costs were assigned to it in May: direct materials, \$12,000; direct labor, \$3,800; and overhead, \$1,406. 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?

 Direct Materials Job May June Total 102 12000 13000 25000 103 48000 48000 104 64000 64000 Total 12000 125000 137000 Direct Labor Job May June Total 102 3800 9200 13000 103 26900 26900 104 39000 39000 Total 3800 75100 78900

predetermined overhead rate is used for job 102

 Overhead Rate Choose Numerator / Choose Denominator = Overhead Rate Overhead Costs / Direct labor Costs = Overhead Rate 4810 / 13000 = 37%

 Job Direct Materials Direct Labor Applied Overhead Total cost Cost Transferred to Finished Goods 102 25000 13000 4810 42810 42810 103 48000 26900 9953 84853 84853 104 64000 39000 14430 117430 0 Total 137000 78900 29193 245093 127663

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