Question

Sheds, Inc. designs and builds sheds and outbuildings for individual customers.
The company uses a job cost system and treats each customer's order as a separate job.
At the beginning of January the company had the following raw material inventory:						$600
At the beginning of January the company had the following work-in-process inventories:
Job 21	$13,000
Job 25	$9,000
During January, the following activities took place:
1. Started jobs 26 and 27.
2. Purchased raw materials in January:		$12,000
Requisitioned (or used) the following raw materials to the specific jobs:
Job 21	$2,000
Job 25	$5,000
Job 26	$1,000
Job 27	$3,000
3. Incurred January manufacturing payroll:
Direct Labor
Job 21	$750
Job 25	$2,000
Job 26	$900
Job 27	$1,500
Indirect labor	$600
4. Incurred additional manufacturing overhead costs for January:
Production equipment rent				$2,000
Manufacturing supplies purchased and used				$800
Factory utilities				$500
5. Applied manufacturing overhead using a predetermined rate based on predicted annual overhead
and predicted annual direct material cost as follows:
Predicted Annual Overhead		$48,000
Predicted Annual Direct Material cost		$120,000
6. Completed jobs 25 and 27.
7. Customer for Job 27 picked up completed job and was billed the following:
Job 27	12,000
8. The company had the following period costs that they incurred:
Sales commissions		$2,000
Administrative salaries		$3,000
1. Develop the predetermined overhead rate.
2. Complete the job cost sheets provided below for the month of January:
		Job 21	Job 25	Job 26	Job 27
Beginning Balance
Current costs:
Direct materials
Direct Labor
Applied overhead
Total

Answer 1

1)	Predetermined overhead rate
	predicted annual overhead/predicted annual direct material cost
	48,000/120,000
	0.4
	$.04 or 40%
2)	Job cost sheets
				job 21	job25	job26	job27
	Beginning balance			13,000	9,000
	Current costs:
	Direct materials			2,000	5,000	1,000	3,000
	Direct labor			750	2,000	900	1,500
	Applied overhead			800	2000	400	1200
	total			16,550	18,000	2300	5700
	Applied overhead = direct material of respective job *40%