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Assigning Overhead To A Job Beta Corp. applies overhead to jobs on the basis of direct...

Assigning Overhead To A Job Beta Corp. applies overhead to jobs on the basis of direct labor costs. Job X which was started and completed during the current period shows charges of $10,000 for direct materials, $16,000 for direct labor, and $12,000 for overhead on its job cost sheet. Job Y which still was in process at year end shows charges of $5,000 for direct materials, and $8,000 for direct labor. Required: Should any overhead cost be applied to Job Y at year end? If so, how much? Explain briefly. How will the costs included in Job Y’s cost sheet be reported within Beta Corps. financial statements at the year end?

Business   Accounting   
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Answer #1
particulars current year job y % absorption

material

 $10,000 $5,000
labour $16,000 $8,000
overhead $12,000 $6,000 75% = 12000/16000*100
total $38,000 $19,000

as given in question , asigning Overhead To A Job Beta Corp. applies overhead to jobs on the basis of direct labor costs.

overhead cost for job y= laobur for joby * absorption %

overhead cost for job y = $ 8,000 * 75 % = $ 6,000

overhead are absorbed on the basis of labour cost by using following formula

absorption % = overhead cost / labour cost *100

absorption % = 12000/16000*100 = 75%

total cost for job y = $19,000

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