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Divine Bath Works is a leader in the bath fixtures industry, rising to prominence with the introduction of over-the-counter sinks. The following data pertain to September, the last month of Divine's fiscal year. Type of Inventory Balance as of September 1 Materials (direct and indirect) Work in Process Finished Goods $28,100 $124,320 $245,000 The Work in Process Inventory on 9/1 consisted of one job, Job X, for 700 units of Model OO, an oval, over-the-counter sink. The Finished Goods Inventory on 9/1 comprised the following: Model Number (description) O0 (Oval, over-the counter) RI (Round, in-the counter) OI (Oval, in-the counter) Quantity Cost per unit Total Cost 100 400 450 $320.00 $197.25 $298.00 $32,000 $78,900 $134,100 $245,000 Total Divine uses a "normal" costing system, combined with the FIFO inventory flow assumption, to cost its inventories. That is, Divine traces actual materials and labor costs to individual jobs. It allocates manufacturing overhead using a predetermined overhead rate computed at the start of the year. Divine allocates overhead using direct labor hours as the allocation basis (cost driver).

Answer 1

1

Predetermined overhead rate=Estimated overhead cost/Estimated direct labor hours=1688400/80400=$21 per DLH

For the month of September:

Actual overhead cost:

$

Indirect materials

22000

Indirect labor

32000

Supervision

18400

Depreciation

32650

Utilities

8900

Factory rent

15400

Total

129350

Applied overhead cost=Actual direct labor hours* Predetermined overhead rate

Actual direct labor hours:

Hours

Job

X

1920

Job

K

2430

Job

L

1678

Job

B

845

Total

6873

Applied overhead cost=6873*21=$ 144333

Applied overhead > Actual overhead. Hence over application of overhead

Over applied overhead=144333-129350=$ 14983

For the year ended September 30:

Actual overhead cost=Overhead incurred till Sep 1+ Overhead incurred durig september=1569450+129350=$ 1698800

Applied overhead cost=Actual direct labor hours* Predetermined overhead rate

Actual direct labor hours=DLH till Sep 1+ DLH durig september=75315+6873=82188 hours

Applied overhead cost=82188*21=$ 1725948

Applied overhead > Actual overhead. Hence over application of overhead

Over-applied overhead=1725948-1698800=$ 27148

2

Ending balance of work in process cosnsist of Cost of jobs not completed

Here, the only job which is not completed is Job B

Cost of Job B will give the ending balance in work in process

Cost of Job B:

$

Direct materials

11450

Direct labor

15210

Overhead applied

(845*21)

17745

Total job cost

44405

Ending balance of work in process=$ 44405