Answered Essay: Question-1: ASDF Co. employs a job-order costing system, and it began operations on March 1. The budgeted overhead is 250,000, and the budg

Question-1: ASDF Co. employs a job-order costing system, and it began operations on March 1. The budgeted overhead is 250,000, and the budgeted direct labor is 100,000. The actual operations for the month of March are summarized as follows:

a. Purchases of raw material, 25,000 pieces @ $1.20/piece.

b. Material and labor costs charged to production:

Job No. J-11 J-12 J-13 J-14 J-15

# Units 10,000 8,800 16,000 8,000 20,000 recpectivly.

DM Cost $4,000 3,600 7,000 3,200 8,000 recpectivly

DL Cost $6,000 5,400 9,000 4,800 3,600 recpectivly

DL Hours 3,000 2,700 4,500 2,400 1,800 recpectivly

c. Actual overhead costs incurred: Variable $18,500 Fixed 15,000

d. Completed jobs: J-11, J-12, J-13, and J-14

e. Sales-$105,000. All units produced on Jobs J-11, J-12, and J-13 were sold. Required:

Compute the following balances on March 31: a. Material inventory d. Cost of goods sold b. Work in process inventory e. Under- or overapplied overhead c. Finished goods inventory

Expert Answer


a. Material inventory = Beginning inventory + Purchases – Issues to Production = 0 + 25,000 x $ 1.20 – $ 25,800 = $ 4,200

b. Cost of Goods Sold : $ ( 17,500 + 15,750 + 27,250) = $ 60,500

J-11 J-12 J-13
$ $ $
Direct Material 4,000 3,600 7,000
Direct Labor 6,000 5,400 9,000
Manufacturing Overhead 7,500 6,750 11,250
Cost of Goods Sold 17,500 15,750 27,250

Predetermined overhead rate = Budgeted Overhead / Budgeted Direct Labor Hours = $ 250,000 / 100,000 = $ 2.50 per direct labor hour.

b. Work in Process Inventory : $ 16,100

Direct Materials $ 8,000
Direct Labor $ 3,600
Manufacturing Overhead ( 1,800 DLH x $ 2.50) $ 4,500
Total manufacturing costs $ 16,100

c. Finished Goods Inventory : $ 14,000

Direct Materials $ 3,200
Direct Labor $ 4,800
Manufacturing Overhead ( 2,400 DLH x $ 2.50 ) $ 6,000
Total manufacturing costs $ 14,000

e. Overapplied overhead : $ ( 36,000 – 33,500) = $ 2,500

Overhead applied = Total DLH x $ 2.50 = 14,400 DLH x $ 2.50 = $ 36,000

Overhead incurred = $ 18,500 + $ 15,000 = $ 33,500

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