Question

Overhead applied to production

Problem: ABC Corp. uses job order costing. Overhead applied to production is at a predetermined rate of 80% based on direct labor costs.

The following accounts appear in the general ledger of the company for the month of September 2020

Debits
Work in process, September 1              $60,000
Direct Materials 120,000
Direct Labor 100,000
Factory overhead 80,000

On September 30, 2020 finished goods completed from work in process cost $320,000. Job No. 1 was the only job not completed in September and has been charged P9,200 for factory overhead.

Required: Compute for the cost of Job No.1 at September 30, 2020.

Answer 1

1]	Beginning WIP cost	$ 60,000
	Costs added during the month = 120000+100000+80000 =	$        300,000
	Total debits to the WIP account	$        360,000
	Less: Transferred to FG	$        320,000
	Cost of Job 1, as on September 30, 2020	$ 40,000
2]	Breakup of costs of WIP-Job N0 1:
	Overhead [given]	$             9,200
	Direct labor cost = 9200/80% =	$           11,500
	Direct material cost = 40000-9200-11500 =	$           19,300
	Total cost of Job No 1	$           40,000