Question

Johnson Inc. is a job-order manufacturing company that uses a predetermined overhead rate based on direct labor hours to apply overhead to individual jobs. For the current year, estimated direct labor hours are 93,000 and estimated factory overhead is $511,500. The following information is for September of the current year. Job A was completed during September, and Job B was started but not finished

September 1, inventories       

Materials inventory $ 8,400   

Work-in-process inventory (All Job A) 33,000   

Finished goods inventory 71,500  

Material purchases 117,500   

Direct materials requisitioned       Job A 74,000    Job B 38,000   

Direct labor hours      Job A 5,100     Job B 4,400  

Labor costs incurred     

Direct labor ($7.50/hour) 71,250   

Indirect labor 14,400   

Supervisory salaries 6,900   

Rental costs     

Factory 7,900   

Administrative offices 2,700   

Total equipment depreciation costs     

Factory 8,850   

Administrative offices 2,950   

Indirect materials used 12,900

1.What is the total cost of Job A?

2.What is the total factory overhead applied during September?

3.	What is the overapplied or underapplied overhead for September?

Answer 1

Solution

Predetermined overhead rate=estimated overhead/estimated direct labour hour

=$511,500/93,000

=$5.5 per direct labour hour

1.

Total cost of job A:

Direct material =$74,000

Direct labour ($7.50×5100)=$38,250

Overhead(5100×$5.50)=$28,050

Work in process=$33,000

Total cost=$173,300

2.

Total factory overhead applied during September:

=(5100+4400)direct labour hour×$5.50

=$52,250

3.

Actual overhead in September:

Indirect labour=$14,400

Supervisors salary=$6,900

Rental costs factory=$7,900

Equipment depreciation factory=$8,850

Indirect material=$12,900

Total actual overhead=$50,950

Overapplied Overhead =Applied overhead- Actualoverhead

=$52,250-$50,950

=$1,300