Question

Johnson Company applies overhead to products using direct labor hours as the activity level. During 2019,...

Johnson Company applies overhead to products using direct labor hours
as the activity level. During 2019, Johnson Company had the following
estimated costs:

Direct materials .................... $278,000
Direct labor ........................  255,000 (15,000 hours expected)
Advertising .........................   37,000
Rent on factory building ............   38,000
Depreciation .................... ...   60,000
Indirect materials ..................   20,000
Sales commissions ...................   40,000
Production supervisor's salary ......   50,000
Insurance on factory equipment ......   18,000
CEO's salary ........................   95,000

The following additional information is available:

1. 30% of the depreciation relates to equipment in the administrative
   offices while 70% of the depreciation relates to equipment in the
   factory.

2. Direct laborers are paid $17 per hour.

During 2019, Johnson Company began work on three jobs. Information
relating to these three jobs appears below:

                                  Job #359      Job #360      Job #361
direct materials ..............    $98,000       $75,000       $91,000
direct labor hours ............      4,700         6,000         5,800

By the end of 2019, job #360 and job #361 had been completed. Job #359
was not completed by the end of 2019. Additionally, by the end of 2019,
job #360 had been sold while job #361 was not sold. Johnson Company had
total actual overhead cost of $193,000 during 2019.

Calculate the cost of goods sold reported by Johnson Company for 2019
after the overhead variance has been closed.

Homework Answers

Answer #1
Total estimated factory Overheads:
Rent on building 38000
Depreciation (60000*70%) 42000
Indirect material 20000
Production supervisory salaries 50000
Insurance on equipment 18000
Total Estimated Factory OH 168000
Divide: Estimated DLH 15000
OH per DLH 11.2
Job Cost sheet
359 360 361 Total
Material 98000 75000 91000 264000
labour cost @17 79900 102000 98600 280500
Overheads applied @11.20 52640 67200 64960 184800
Total Cost 230540 244200 254560 729300
Status WIP Sold FG
Total Overheads incurred 193000
Less: OH applied 184800
Under-applied Overheads 8200
Cost of goods sold (Job NO. 360) (Unadjusted) 244200
Add: Under-applied overheads 8200
Adjusted cost of goods sold 252400
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