Question

Question 1 (9 marks - suggested time 16 minutes) Sheldon and Leonard recently opened their company Subatomic Shirts that manufactures customized t-shirts They have assigned the manufacturing costs to their first 4 jobs and have provided you with the following information for the month of January: Manufacturing Manufacturing Costs Month Month Month costs as of 1 Number Started Assigned in January Dec. 31st Completed Sold Direct Direct Manufacturing Materials Labour Overhead H20 SIRO December December January $4,000 $8,000 $14,000 $21,000|December completed cold H22 $1,000 $2,000 $1,000 $1,500|December January $14,000 $5,000 $7.500|january panuary H21 Not 123 Subatomic sold Job H20 in January for $33,000. The company incurred selling and administrative expenses totaling $7,500 in January. Subatomic uses a normal (traditional) costing system to apply overhead cost to each job. (a) What was the balance in Work in Process Inventory on January 31"? (3 marks) (b) What was the balance in Finished Goods Inventory on January 1'? (1 mark) (c) Subatomic's actual overhead cost for January was $32,500. What was the total value of overhead applied in January? (2 marks) (d) Was overhead underapplied or overapplied in January and by how much? (2 marks) Circle the correct answer: Over / under applied By how much? e) Subatomic assigns overapplied or underapplied overhead to cost of goods sold. Will the amount increase or decrease the value of Cost of Goods Sold in January? (1 mark)

Answer 1

Answer:-

a) Balance in work in progress Inventory on January 31 are as follows :-

In the above information it was given that only job H21 was not completed and all job was completed so work in progress balance is calculated for H21 Job .

Job H21
Manufacturing cost on Dec.31	$4,000
Manufacturing cost in January :
Direct Material	$8,000
Direct Labour	$14,000
Manufacturing overhead	$21,000
Work in progress inventory Balance on January 31	$47,000

b) Balance in Finished Goods Inventory on January 1 is as follows :-

In the following information it was given that only H20 job is completed on December and Job is completed at January .Thus ,we calculate the balance of finished goods inventory Balance of H20 job.

Finished goods inventory Balance of H20 job is $18,000

c) Total value of applied overhead in January = Manufacturing overhead of Job H21 + Manufacturing overhead of Job H22 + Manufacturing overhead of H23

Total value of applied overhead in January = $21,000 + $1,500 + $7,500

Total value of Applied overhead in January = $30,000

c) Actual overhead cost for January = $32,500

Applied overhead = $30,000

It seems that the overhead cost is underapplied as Actual overhead cost is more than applied overhead cost for January.Thus ,the correct answer is Underapplied

By How much = $32,500 - $30,000 = $2,500

As HOMEWORKLIB RULES rule,we only give answer to first four sub part . For this reason I give the answer to (e) part but not explaining it.

(e) When Subatomic assigns overapplied or underapplied to cost of goods sold,then the amount Increase the value of Cost of Goods in January.