Question

Managerial Accounting - predetermined overhead

ABC Company uses a job-order costing system and a predetermined overhead rate based on machine hours. At the beginning of the year, the company estimated the followings: $ Factory overhead Machine hours 50,000 8,000 The following information pertains to December of the current year: Work-in-Process, December 1 Materials requisitioned Direct labor cost Actual machine hours Job 101 Job 201 $ 6,000 $ 2,500 $ $ 1,200 $ 800 $ $ 1,000 $ 400 $ 300 200 Job 301 1,500 650 250 100 Actual manufacturing overhead incurred in December 5,000 The Company bills completed job at cost plus 50%. a) Compute the predetermined overhead application rate. b) Determine the costs of the three jobs. c) If Job 101 was completed, what is the balance of Work-in-process.

Answer 1

2 Predetermined Overhead Rate = 3 Predetermined Overhead Rate = 4 Predetermined Overhead Rate = Factory Overhead/Machine Hours $50,000/8,000 $ 6.25

Work-Process, December 1 Materials Requisitioned Direct Labor Cost 5 Factory Cost Job 101 Job 102 Job 103 6,000 2,500 1,500 1,200 800 650 1,000 400 250 1875 1250 (300 machine hours * $6.25) |(200 machine hours * $6.25) (100 machine hours * $6.25) 625 3 Total Cost 10,075 4,950 3,025 0 c) If Job 101 was completed the balance in work-in-process would be $0