Question

During 2017, Oriole Company expected Job No. 26 to cost $300000 of overhead, $500000 of materials, and $200000 in labor. Oriole applied overhead based on direct labor cost. Actual production required an overhead cost of $220000, $480000 in materials used, and $150000 in labor. All of the goods were completed. What amount was transferred to Finished Goods?

Answer 1

Solution:
	Amount transferred to finished goods = $855,000
Working Notes:
	Since, Oriole applied overhead cost based on direct labor cost.
	Expected Overhead = $300,000 when Expected direct labor cost = $200,000
	Means Overhead cost is 1.5 time of direct labor cost.
	Expected overhead cost = 1.5 x 200,000 = $300,000 given expected overhead cost.
Now,	Calculation of amount transferred to Finished goods
	Actual material used	$480,000
	Actual labor cost	$150,000
	Overhead	$225,000
	[ 1.5 times x labor cost ]
	[ 1.5 x 150,000 ]
	Amount transferred to finished goods	$855,000
Please feel free to ask if anything about above solution in comment section of the question.