Question

XYZ 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, XYZ applies overhead to production at a predetermined rate of								120%
Job No. 100, the only job still in process at the end of January, has been charged with factory overhead of								6000
								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								940,000
	Actual factory overhead costs								260,000
Required:
The amount of underapplied or overapplied overhead is:
Indicate the amount if overapplied (O) or underapplied (U)
The amount of direct materials charged to Job No. 100 was?

Answer 1

Requirement i) $240,000

The amount of underapplied or overapplied overhead is:

$240,000

Calculations:

Cost of goods available for sale	$ 940,000
Less: Beginning Finished Goods Inventory	($ 115,000)
Cost of Goods Manufactured	$ 825,000
Add: Ending WIP inventory	$ 42,000
Less: Beginning WIP Inventory	($ 66,000)
Total Manufacturing costs	$ 801,000
Less : Direct Materials Used in Production	($ 361,000)
Direct labor + Overhead applied	$ 440,000

*Overhead applied = $440,000 x 120/220 = $240,000

Requirement ii) Underapplied

Indicate the amount if overapplied (O) or underapplied (U)

(U)

Requirement iii) $361,000

Calculations:

Direct Materials:
Beginning Inventory	$ 77,000
Add: Purchase of Raw Materials	$ 324,000
Deduct: Ending inventory	$ 40,000
Direct Materials Used in Production	$ 361,000