Question

Management Accounting

Local Landscaping uses a job-order costing system to track the costs of its landscaping projects. The company provides complete garden design and landscaping services. The following table provides data concerning the three landscaping projects that were in progress during May. There was no work in process at the beginning of May. Designer-hours Direct materials cost Direct labour cost. Williams 200 $4,800 $2,400 Project Chandler 80 $1,800 $1,000 Nguyen 120 $3,600 $1,500 Actual overhead costs were $16,000 for May. Overhead costs are applied to projects on the basis of designer-hours since most of the overhead is related to the costs of the garden design studio. The predetermined overhead rate is $45 per designer-hour. The Williams and Chandler projects were completed in May, the Nguyen project was not completed by the end of the month. No other jobs were in process during May. Required: 1. Compute the amount of overhead cost that would have been charged to each project during May. 2. What is the cost of each project? 3. What is the balance in the Work in Process account at the end of the month? 4. What is the balance in the Overhead account at the end of the month? What is this balance called?

I'd be grateful if someone could show how to approach this management accounting problem. Thanks in advance.

Answer 1

Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!

Local Landscaping
Answer 1
	Williams	Chandler	Nguyen	Total	Note
Designer hours	200.00	80.00	120.00		A
Predetermined Overhead rate	45.00	45.00	45.00		B
Overhead cost charged	9,000.00	3,600.00	5,400.00	18,000.00	C=A*B
Answer 2	Williams	Chandler	Nguyen		Note
Direct Materials	4,800.00	1,800.00	3,600.00		D
Direct Labor	2,400.00	1,000.00	1,500.00		E
Overhead cost charged	9,000.00	3,600.00	5,400.00		See C
Cost of each project	16,200.00	6,400.00	10,500.00		F=D+E+C
Answer 3	As Project Nguyen is the only project left at the end of May month. So this is the Work in Process at the end of May. Cost of this project is the value of Work in Process at the end of May i.e. $ 10,500.
Answer 4	Amount $				Note
Overhead cost charged to projects	18,000.00				See C
Actual overhead cost	16,000.00				G
Balance in Overhead account	2,000.00				H=C-G
This balance is called over applied balance in overhead account because actual cost is less than the overhead cast charged to products.