Question

Problem 2 East Coast Colorworks produces modular office space units. The company uses a job order costing system to accumulate product costs. Because much of the production process is automated, East Coast has selected machine hours as its overhead application rate In October, East Coast worked on four jobs. Job 105 and Job 106 were started in September and completed and delivered to customers in October. Job 107 and Job 108 were started in October and Job 107 was finished but has yet to be sold. The relevant data for September and October are ob 105 Job 106 Job 107 Job 108 Costs added September Direct materials Direct labor Mfg. Overhead Machine Hours $25,000 36,000 $40,000 1,600 MH $ 10,000 $4,000 $ 500 20 MH Costs added in October Direct materials Direct labor Machine Hours 0 $ 8,000 120 MH $ 9,000 $28,000 500 MH $ 8,000 $12,000 325 MH $ 4,000 500 45 MH Required: a) Calculate the predetermined overhead rate used by East Coast. b) Calculate the total manufacturing cost for October c) Calculate the total cost for each of the five jobs as of October 31. d) Calculate the cost of goods manufactured for October e) Calculate the balance in the Work in Progress Inventory account as of October 31. f) Calculate the Cost of Goods Sold for October. e) Calculate the balance in the finished goods Inventory account as of October 31.

Answer 1

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a. Predetermined overhead rate used:
		Job 105	Job 106
Manufacturing Overheads	A	$ 40,000	$        500
Machine Hours	B	1,600	20
Predetermined Overhead Rate	A/B	$      25.0	$      25.0
b. Manufacturing Cost for October:
		Job 105	Job 106	Job 107	Job 108	Total
Direct Material		$           -	$    9,000	$              8,000	$    4,000	$ 21,000
Direct Labor		$    8,000	$ 28,000	$            12,000	$       500	$ 48,500
Manufacturing Overheads		$    3,000	$ 12,500	$              8,125	$    1,125	$ 24,750
(Machine Hours*$25 Rate in a)
Manufacturing Cost for October		$ 11,000	$ 49,500	$            28,125	$    5,625	$ 94,250
c. Total Cost
		Job 105	Job 106	Job 107	Job 108	Total
Beginning WIP:
25000+36000+40000		$101,000				$101,000
10000+4000+500			$ 14,500			$ 14,500
Direct Material		$           -	$    9,000	$              8,000	$    4,000	$ 21,000
Direct Labor		$    8,000	$ 28,000	$            12,000	$       500	$ 48,500
Manufacturing Overheads		$    3,000	$ 12,500	$              8,125	$    1,125	$ 24,750
(Machine Hours*$25 Rate in a)
Manufacturing Cost for October		$112,000	$ 64,000	$            28,125	$    5,625	$209,750
d. Cost of Goods Manufactured
Direct Material Used	From part b		$ 21,000
add:Direct manufacturing labor costs	From part b		$ 48,500
add:Manufacturing Overheads	From part b		$ 24,750
Manufacturing costs incurred			$ 94,250
Add beginning work-in-process inventory	101000+14500		$115,500
Total manufacturing costs to account for			$209,750
Less Ending WIP-Job 108	From part c/e		$   -5,625
Cost of Goods Manufactured			$204,125
e. Work in process as on October 31
		Job 105	Job 106	Job 107	Job 108	Total
Beginning WIP:
25000+36000+40000		$101,000				$101,000
10000+4000+500			$ 14,500			$ 14,500
Direct Material		$           -	$    9,000	$              8,000	$    4,000	$ 21,000
Direct Labor		$    8,000	$ 28,000	$            12,000	$       500	$ 48,500
Manufacturing Overheads		$    3,000	$ 12,500	$              8,125	$    1,125	$ 24,750
(Machine Hours*$25 Rate in a)
Manufacturing Cost for October		$112,000	$ 64,000	$            28,125	$    5,625	$209,750
Work in process		No, Sold	No, Sold	No, Completed	Yes
Work in Process as on October 31	Job 108	$    5,625
f. Cost of Goods Sold
Beginning Finished Goods Inventory		$           -
Add: Cost of Goods Manufactured		$204,125
Cost of Goods available for sale		$204,125
Less: Ending finished goods inventory	Job 107	$ -28,125
Cost of Goods Sold	Job 105 and 106	$176,000
g. Finished goods inventory on October 31
Finished Goods Inventory	Job 107	$ 28,125
Direct Material	$                 8,000
Direct Labor	$               12,000
Manufacturing Overheads	$                 8,125
(Machine Hours*$25 Rate in a)
	$               28,125