Question

Progressive Painting Company (PPC) is a successful company in commercial and residential painting. PPC has a...

Progressive Painting Company (PPC) is a successful company in commercial and residential painting. PPC has a variety of jobs: new construction, repair and repainting existing structures, and restoration of very old buildings and homes. The company is known for the quality and reliability of its work, and customers expect to pay a little more for those benefits. One of the company’s core values is sustainability, and it insists on using the most environmentally friendly paints and materials in its work; it has refused jobs where the client required a more environmentally harmful paint than PPC thought was appropriate for the application. The company’s commitment to sustainability has lost PPC some jobs, but it has also attracted a loyal and growing customer base.

    The company uses job costing and applies overhead on the basis of direct labor hours. Overhead for the company consists of painting equipment, trucks, supervisory labor, supplies, and administrative operation costs. The total budgeted costs for the year are shown below.
Budgeted Data
  Direct materials $ 2,900,000
  Direct labor hours 33,500
  Direct labor dollars $ 750,000
  Gallons of paint 20,000
  Total overhead $ 360,125
PPC has just completed two jobs:
  Job Direct Materials Gallons of Paint Direct Labor Hours Direct Labor Cost
  Prevette $ 3,800 24        42        $ 855
  Harmon 4,600 38        66        1,366
Required:
1. Determine the total cost of each job. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
Business   Accounting   
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Answer #1

Budgeted overheads = $360,125

Budgeted direct labor hour = 33,500

Predetermined overhead rate = Budgeted overheads/Budgeted direct labor hour

= 360,125/33,500

= $10.75 per direct labor hour

Diirect labor hour used in Job Prevette = 42

Overhead applied to job prevette

= Diirect labor hour used in Job Prevette x Predetermined overhead rate

= 42 x 10.75

= $451.5

Direct labor hour used in Job Harmon = 66

Overhead applied to job Harmon = Direct labor hour used in Job Harmon x Predetermined overhead rate

= 66 x 10.75

= $709.5

Job cost Sheet

Prevette Harmon
Direct material 3,800 4,600
Direct labor 855 1,366
Overhead applied 451.5 709.5
Total cost $5,106.5 $6,675.5

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