Question

Job 731 was recently completed. The following data have been recorded on its job cost sheet:

Direct Materials	$50,000
Direct Labor (1,400 actual hours)	$70,000

The company applies manufacturing overhead on the basis of direct-labor hours. The predetermined overhead rate is based upon an estimated $100,000 of manufacturing overhead for the year and an estimated 1,000 direct labor hours.

Assume no other jobs were worked on during the year and that Job 731 was completed by October 31^st, two months before the end of the fiscal year on December 31^st.

Assume that actual manufacturing overhead was $110,000 once all of the related bills arrived by December 31^st.

Also assume that any related accounts had sufficient balances to complete the job (e.g., Raw Material Inventory) and that Job 731 was sold to the customer before year end.

What is the adjusted balance (after the closing out of the Manufacturing Overhead Variance) in the Cost-of-Goods account after Job 731 was sold to the customer?

	$210,000
	$230,000
	$220,000
	$260,000

Answer 1

Oh rate per DLH
Estimatd OH		1,00,000
Divide: Estimateed DLH	1,000
Oh rate per DLH		100
Oh applied to Job:
DLH used			1400
Multiply: OH rate		100
Overheads applied		140000
Over-applied Oh:
Overheads applied		1,40,000
Overheads incurred		1,10,000
Over-applied Oh:		30000
Cost of goods sold (Adjusted)
Material cost		50000
Direct labour cost		70000
Overheads applied		140000
Total cost incurred		260000
Less: Overheads over-applied	30000
Adjusted cost of goods sold	230000
Answer is $ 230,000