Question

The following selected data were taken from the books of the Bixby Box Company. The company uses job costing to account for manufacturing costs. The data relate to June operations.

   
A) Materials and supplies were requisitioned from the stores clerk as follows:
  
   Job 405, material X, $9,000.
   Job 406, material X, $3,780; material Y, $7,740.
   Job 407, material X, $9,000; material Y, $4,140.
   For general factory use: materials A, B, and C, $2,880.
     
B) Time tickets for the month were chargeable as follows:
      

Job 405	$14,220	3,800 hours
Job 406	$18,000	4,400 hours
Job 407	$10,260	2,520 hours
Indirect labor	$ 4,500

   
C) Other information:

    Factory paychecks for $46,980 were issued during the month.
    Various factory overhead charges of $23,490 were incurred on account.
    Depreciation of factory equipment for the month was $5,800.
    Factory overhead was applied to jobs at the rate of $3.25 per direct labor hour.
    Job orders completed during the month: Job 405 and Job 406.
    Selling and administrative costs were $2,700.
    Factory overhead is closed out only at the end of the year.

The balance in the factory overhead account would represent the fact that overhead was:

Answer 1

Total factory overhead costs incurred

= Indirect materials + Indirect labor + Various factory overhead charges + Depreciation of factory equipment

= $2,880 + $4,500 + $23,490 + $5,800

= $36,670

And,

Total factory overhead applied to jobs

= Total direct labor hours for all jobs x Predetermined factory overhea rate

= (3,800 + 4,400 + 2,520) x $3.25

= $34,840

Since the amount of total factory overhead applied to jobs is less than the total factory overhead costs incurred, the balance in the factory overhead account would represent the fact that overhead was underapplied.