Question

Southwestern Fashions, Inc. which uses a job-order costing system, had two jobs in process at the start of the year: job no. 101 ($84,100) and job no. 102 ($53,500). The following information is available:

  

a.	The company applies manufacturing overhead on the basis of machine hours (based on practical capacity). Budgeted overhead and machine activity for the year were anticipated to be $824,000, and 16,000 hours, respectively.
b.	The company worked on four jobs during the first quarter. Direct materials used, direct labor incurred, and machine hours consumed were as follows:

Job No.	Direct Material	Direct Labor	Machine Hours
101	$21,000	$35,000	1,200
102	—	22,000	700
103	44,000	65,000	2,000
104	15,000	8,800	500

c.

Manufacturing overhead during the first quarter included charges for depreciation ($32,400), indirect labor ($60,000), indirect materials used ($5,100), and other factory costs ($139,500).

d. Southwestern Fashions completed job no. 101 and job no. 102. Job no. 102 was sold on account, producing a profit of $34,800 for the firm   

Required:

1. Determine the company’s predetermined overhead application rate.

2. Determine the cost of the jobs still in production as of March 31. (Do not round intermediate calculations)

3. Did the finished goods inventory increase or decrease during the first quarter? By how much?

4. Was Manufacturing overhead under or over applied for the first quarter of the year? By how much?

Answer 1

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