Question

Applying Overhead to Jobs, Costing Jobs

Gorman Company builds internal conveyor equipment to client specifications. On October 1, Job 877 was in process with a cost of $18,710 to date.

During October, Jobs 878, 879, and 880 were started. Data on costs added during October for all jobs are as follows:

	Job 877	Job 878	Job 879	Job 880
Direct materials	$14,380	$5,960	$3,550	$1,790
Direct labor	14,600	8,200	1,700	1,900

Overhead is applied to production at the rate of 80% of direct labor cost. Job 877 was completed on October 28, and the client was billed at cost plus 50%. All other jobs remained in process.

Required:

1.

Prepare a brief job-order cost sheet showing the October 1 balances of all four jobs, plus the direct materials and direct labor costs during October. There is no need to calculate applied overhead at this point or to total the costs.

2. Calculate the overhead applied to each job during October.
3.	Calculate the balance in Work in Process on October 31.
4.	What is the price of Job 877?

Answer 1

1. Job-order cost sheet :

	Job 877	Job 878	Job 879	Job 880
Opening WIP	18710	0	0	0
Direct Materials	14,380	5,960	3,550	1,790
Direct Labor	14,600	8,200	1,700	1,900
Total Costs	47690	14160	5250	3690

2. Calculation of Overhead applied to each job:

Job 877 = 14600*80% = 11680

Job 878 = 8200*80% = 6560

Job 879 = 1700*80% = 1360

Job 890 = 1900*80% = 1520

3. Work in Progress:

	Job 878	Job 879	Job 880
Opening WIP	0	0	0
Direct Materials	5,960	3,550	1,790
Direct Labor	8,200	1,700	1,900
Overhead applied	6560	1360	1520
Total Costs	20,720	6,610	5,210

Total Work in Progress = 20720+6610+5210 = 32540

4.

Opening WIP	18710
Direct Materials	14,380
Direct Labor	14,600
Overhead Applied	11,680
Total Costs	59370
Add: 50% of Cost	29685
Price of Job 877	89055