Question

ZYX Co, has a job-order cost system. For the month of April, the following debits (credits) appeared in the general ledger account.

Based on direct labor cost, ZYX applies overhead to production at a predetermined rate of 125 %

Job No. 100, the only job still in process at the end of January, has been charged with factory overhead of 5000

		1 -Jan	31 -Jan
Direct materials		77,000	40,000
Work in process		66,000	42,000
Finished Goods		115,000	100,000
Other information
Direct materials purchases			324,000
Cost of goods available for sale			950,000
Actual Factory overhead costs			260,000

Required:

What is the amount of underapplied or overapplied overhead and what is the amount of direct materials charged to Job No. 100 was?

(Please show your work in order to understand it and being able to reproduce it on my own)

Thanks.

Answer 1

If labour costs = x , overheads - 1.25x

direct materials charged = opening stock of direct material + direct material purchases - closing stock of raw material

direct materials charged = 77000 + 324000 - 40000 = 361000

So we will plug in the data in the cost sheet format as given below

thus we get

361000 + x + 1.25x + 66000 - 42000 + 115000 = 950000

500000 + 2.25x = 950000

2.25x = 450000

x = 200000

thus overheads applied = 1.25x = 200000 x 1.25 = 250000

Actual overheads = 260000

Under application is when when actual overheads are more than what was applied ,

thus in this case overheads are (260000 - 250000) 10000 under applied