Question

Determine cost of jobs and ending balance in work in process and overhead accounts. (LO 2, 3, 4), AP Don Lieberman and Associates, a CPA firm, uses job order costing to capture the costs of its audit jobs. There were no audit jobs in process at the beginning of November. Listed below are data concerning the three audit jobs conducted during November.

	Lynn	Brian	Mike
Direct materials	$600	$400	$200
Auditor labor costs	$5,400	$6,600	$3,375
Auditor hours	72	88	45

Overhead costs are applied to jobs on the basis of auditor hours, and the predetermined overhead rate is $50 per auditor hour. The Lynn job is the only incomplete job at the end of November. Actual overhead for the month was $11,000.

Instructions

(a) Determine the cost of each job.

(b) Indicate the balance of the Service Contracts in Process account at the end of November.

(c) Calculate the ending balance of the Operating Overhead account for November

Answer 1

a
Lynn	9600
Brian	11400
Mike	5825
b
Balance in service contracts in process account	9600
c
Balance in operating overhead account	750	Underapplied

Workings:
	Lynn	Brian	Mike	Total
Direct materials	600	400	200	1200
Auditor labor costs	5400	6600	3375	15375
Overhead applied	3600	4400	2250	10250
Total cost	9600	11400	5825	26825
Actual overhead	11000
Less: Overhead applied	10250
Balance in operating overhead account	750
	Lynn	Brian	Mike
Overhead applied	=72*50	=88*50	=45*50