Question

Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. It started only two jobs during March—Job P and Job Q. Job P was completed and sold by the end of March and Job Q was incomplete at the end of March. The company uses a plantwide predetermined overhead rate based on direct labor-hours. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March): Estimated total fixed manufacturing overhead $ 11,000 Estimated variable manufacturing overhead per direct labor-hour $ 1.20 Estimated total direct labor-hours to be worked 2,200 Total actual manufacturing overhead costs incurred $ 12,700 Job P Job Q Direct materials $ 13,200 $ 8,200 Direct labor cost $ 16,900 $ 7,800 Actual direct labor-hours worked 1,300 600

What is the company’s predetermined overhead rate? (Round your answer to 2 decimal places.)

2.

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2. How much manufacturing overhead was applied to Job P and Job Q?

3.

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3. What is the direct labor hourly wage rate?

4.

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4. If Job P includes 24 units, what is its unit product cost?

   

5.

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5 What is the total amount of manufacturing cost assigned to Job Q as of the end of March (including applied overhead)?

6.

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6. What is the amount of underapplied or overapplied overhead?

7.

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7. Will your answer to question 6 increase or decrease unadjusted cost of goods sold?

	Increase
	Decrease

8.

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8. If Sweeten Company requisitioned $24,000 from raw materials inventory during March, then how much indirect materials cost would be included in Manufacturing Overhead Incurred?

9.

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9. If Sweeten Company’s labor time tickets totaled $28,800 for the month of March, then how much indirect labor cost would be included in Manufacturing Overhead Incurred?

10.

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10. Calculate the cost of goods sold using the direct method.

11.

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11. Calculate the cost of goods manufactured using the indirect method.

12.

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12. Calculate the cost of goods sold using the indirect method.

13.

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13. How would you revise your answer to question 11 if the company had beginning work in process inventory of $8,200?

14.

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14. How would you revise your answer to question 12 if the company had beginning finished goods inventory of $12,200?

  

15.

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15. Assume that Job P includes 24 units that each sell for $2,600 and that the company’s selling and administrative expenses in March were $20,000. Prepare an absorption costing income statement for March.

Answer 1

1. Computation of Company’s Predetermined overhead rate:-
	Predetermined overhead rate	=	Estimated total fixed manufacturing overhead	=	$11,000	=	$5.00	per direct labor-hour
			Estimated total direct labor-hours		2200

2. Computation of manufacturing overhead applied to Job P and Job Q:-
	Jobs		Direct labor-hours		Predetermined overhead rate			Fixed Manufacturing overhead applied	Variable Manufacturing overhead per direct labor hour	Variable Manufacturing overhead applied	Total Manufacturing overhead applied
	a		b		c			d = b*c	e	f = b*e	g = d+f
	Job P		1,300		$        5.00		per direct labor-hour	$                6,500	$                     1.20	$               1,560	$           8,060
	Job Q		600		$        5.00		per direct labor-hour	$                3,000	$                     1.20	$                  720	$           3,720

3. Computation of the direct labor hourly wage rate:-

Jobs

Direct labor cost

Direct labor-hours

Direct labor hourly wage rate

a

b

c

d = b/c

Job P

16,900

1,300

$   13.00

Job Q

7,800

600

$   13.00

4. Computation of unit product cost of Job P :-

Job P

Direct Materials

$                        13,200

Direct labor cost

$                        16,900

Overhead costs

$                          8,060

Total manufacturing cost

$                        38,160

Units produced

24

Unit product cost

$                          1,590

5. Computation of total amount of manufacturing cost assigned to Job Q as of the end of March (including applied overhead) :-

JobQ

Direct Materials

$                          8,200

Direct labor cost

$                          7,800

Overhead costs

$                          3,720

Total manufacturing cost

$                        19,720

6. Calculation of the amount of over/under applied overhead:-

Actual manufacturing overhead incurred

$   12,700

Less:

Total Overhead cost applied

8060+3720

$   11,780

Under applied overhead

$        920

Feel free to ask any clarification, if required. Please provide feedback by thumbs up, if satisfied. It will be highly appreciated. Thank you.