Question

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.

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