Question

Vabrium Inc., uses a job-order costing system and a predetermined overhead rate based on machine hours....

Vabrium Inc., uses a job-order costing system and a predetermined overhead rate based on machine hours. At the beginning of2018, the company estimated manufacturing overhead for the year would be $240,000 and machine hours would be 8,000.

The following information pertains to September 2018:

Job 10             Job 11            Job 12             Total

Work-in-process, Sept. 1

September production activity:

$16,000

$26,000

$38,000

$80,000

Materials used

$4,000

$4,800

$7,200

$16,000

Direct labor cost

$2,400

$3,600

$4,000

$10,000

Machine hours

400

700

900

2,000

Labor hours

120

180

200

500

Actual manufacturing overhead cost incurred in September was $61,000.

Required:

1. Compute the predetermined overhead application rate.

2.  Determine the total cost associated with each job.

3. If jobs 10 and 12 were completed, prepared the journal entry to move the cost.

4.  If job 10 was delivered to customers that paid $50,000 cash, prepare the journal entries. What is the gross profit for job 10?

5. Assuming no begimring work in process, what is the cost assigned to ending work in process?

6. Assuming no beginning finished goods what is the cost assigned to ending finished goods?

7. How much was overhead over/underapplied?

Homework Answers

Answer #1

1. Pre Determined Overhead Application Rate = Predetermined Overhead Cost/ Predetermined Machine Hours

= $240000/8000

= 30 per machine hour

2.

TOTAL COST
Particulars Job 10 Job 11 Job 12
WIP 16000 26000 38000
Material 4000 4800 7200
Labour 2400 3600 4000
Absorbed Overhead 12000 21000 27000
Total Cost 34400 55400 76200

3. Journal Entry:

For Job 10:

Finished Stock A/c dr. $34400

To WIP $16000

To Material $4000

To Labour $2400

To Absorbed Overhead $12000

For Job 12:

Finished Stock A/c dr. $55400

To WIP $26000

To Material $4800

To Labour $3600

To Absorbed Overhead $21000

4. Journal Entry for Sales

a. Cash A/c dr $50000

To Sales A/c $50000

b. Sales A/c $50000

To Gross Profit $15600

To Finised Stock A/c $34400

Gross Profit = $15600

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