Question

# ABC Company applies overhead to products using a pre-determined overhead rate of 80% of direct labor...

```ABC Company applies overhead to products using a pre-determined
overhead rate of 80% of direct labor cost. During 2022, ABC
Company began work on three jobs. Information relating to these
three jobs appears below:

Job A        Job B        Job C
direct materials .......    \$55,000      \$75,000      \$71,000
direct labor ...........    \$42,000      \$39,000      \$64,000

By the end of 2022, Job A and Job C had been completed. Job B was
not completed by the end of 2022. Additionally, by the end of 2022,
Job C had been sold while Job A was not sold. ABC Company had total
actual overhead cost of \$150,000 during 2022.

Assume there were no inventories of any type at January 1, 2022.

Calculate ABC Company's cost of goods sold for 2022 after the
overhead variance is closed.```

#### Homework Answers

Answer #1

Total direct labor cost = \$42,000 + \$39,000 + \$64,000 = \$145,000

The Overhead applied = Total direct labor cost x Predetermined overhead rate

= \$145,000 x 80% = \$116,000

Actual overhead costs incurred = \$150,000

Overhead Underapplied = \$150,000 - \$116,000 = \$34,000

Total cost of Job-C = Direct material + Direct labor + Overhead applied

= \$71000+64,000+(64000*80%) = \$186200

Cost of goods sold for 2022 after the overhead variance = Total cost of Job-C + overhead Underapplied

= \$186200 + \$34,000

= \$220,200

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