Question

Kevin Hall and Associates, a CPA firm, uses job order costing to capture the costs of its audit jobs. There were no audit jobs in process at the beginning of November. Listed below are data concerning the three audit jobs conducted during November.

		Waters Inc.		Renolds Inc.		Bayfield Inc.
Direct materials		$660		$510		$290
Auditor labor costs		$5,900		$7,000		$3,675
Auditor hours		76		94		49

Overhead costs are applied to jobs on the basis of auditor hours, and the predetermined overhead rate is $54 per auditor hour. The Waters job is the only incomplete job at the end of November. Actual overhead for the month was $12,100.

(a) Determine the cost of each job.

		Cost
Waters		$
Renolds		$
Bayfield		$

(b) Indicate the balance of the Service Contracts in Process account at the end of November.

Balance in service contracts in process account

$

(c) Calculate the ending balance of the Operating Overhead account for November.

Balance in operating overhead account

$ DrCr

Answer 1

Answer:
(a)
	Waters Inc.	Renolds Inc	Bayfield Inc.
Direct material	$ 660	$ 510	$ 290
Auditors labour cost	$ 5,900	$ 7,000	$ 3,675
Overhead cost	$ 4,104 ( 76 x $ 54)	$ 5,076 ( 94 x $ 54)	$ 2,646 ( 49 x $ 54)
Total Cost of Job	$ 10,664	$ 12,586	$ 6,611
b)
Balance of the Service Contracts in Process account	Total Cost of Waters Inc.	$ 10,664
(c )
Applied overhead    = $ 4,104 + $ 5,076 + $ 2,646    = $ 11,826
Balance in operating overhead account	(Actual overhead - Applied overhead )
	( $ 12,100 (-) $ 11,826 )	$ 274