Question

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 $ 44,000 $ 54,000 $ 53,000 Direct labor 16,000 30,000 41,000 Overhead applied 5,280 9,900 13,530 Job 102 was started in production in May, and the following costs were assigned to it in May: direct materials, $11,000; direct labor, $3,400; and overhead, $1,122. 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.)

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?

Answer 1

3.

Predetermined overhead rate = Overhead applied / Direct labor

Job 102

Predetermined overhead rate = $5,280 / $16,000

= 0.33 or 33%

Job 103

Predetermined overhead rate = $9,900 / 30,000

= 0.33 or 33%

Job 104

Predetermined overhead rate = $13,530 / $41,000

= 0.33 or 33%

4.

Job	Direct materials	Direct labor	Applied Overhead	Total cost	Cost transferred to Finished goods
102	$44,000	$16,000	$5,280	$65,280	$65,280
103	$54,000	$30,000	$9,900	$93,900	$93,900
104	$53,000	$41,000	$13,530	$107,530	$0
Total	$151,000	$87,000	$28,710	$266,710	$159,180