Question

L The Wham Company uses normal costing in it job-order cost system. At the end of 2018, the balance in the Materials Control account was $5,000. At the end of 2018, the company only had one job in Work in Process. This was Job 32, which had $8,000 of product cost charged to it during 2018. At the end of 2018, the company also only had 3 units from Job 21 in Finished Goods. Each of these units cost $1,200 in product cost. The predetermined overhead rate for 2019 is based on direct labor cost. The estimated overhead cost for 2019 is $125,000, and the estimated direct labor cost for 2019 is $50,000. During 2019, the company charged the following direct costs to the four jobs that were worked on during 2019: Job 32 Direct Materials $10,000 Direct Labor $11,000 Units on job 10 units Job 45 $19,600 $26,400 40 units Job 67 $30,000 $ 6,600 N/A Job 81 $15,000 $16,000 20 units The company keeps both direct and indirect materials in the Materials Control account. During 2019, the company purchased a total of $92,000 in materials. All of the jobs that were worked on during 2019 were finished except Job 67. The actual overhead incurred during 2019 was $138,000, of which $10,400 was for indirect materials. During 2019, the company sold 2 units from Job 21, all 10 units from Job 32, 10 units from Job 45, and 17 units from Job 81. The total sales revenue for the year was $460,000. The period expenses for 2019 totaled $204,000. For questions 1 and 2, assume that any underallocated or overallocated overhead is charged totally to Cost of Goods Sold.

Answer 1

Predetermined overhead rate = $ 125,000 / $ 50,000 = 250 % of direct labor cost.

	Job 32	Job 45	Job 67	Job 81	Total
Beginning work in process	$ 8,000				$ 8,000
Costs incurred during 2019
Direct materials	10,000	19,600	30,000	15,000	74,600
Direct labor	11,000	26,400	6,600	16,000	60,000
Overhead	27,500	66,000	16,500	40,000	150,000
Total manufacturing costs	48,500	112,000	53,100	71,000	284,600
Total cost of work in process	56,500	112,000	53,100	71,000	292,600
Completed and transferred ot	(56,500)	(112,000)	-	(71,000)	(239,500)
Ending work in process	-	-	53,100	-	53,100
Number of units	10	40	-	20
Cost per unit	$ 5,650	$ 2,800	-	$ 3,550

2.

Income Statement
Sales Revenue		$ 400,000
Cost of Goods Sold
Beginning Finished Goods Inventory	$ 3,600
Add: Cost of Goods Manufactured	239,500
Cost of Goods Available for Sale	243,100
Less: Ending Finished Goods Inventory	(95,850)
Cost of Goods Sold ( unadjusted)	147,250
Adjustment for overapplied overhead	(12,000)
Adjusted Cost of Goods Sold		135,250
Gross Profit		264,750
Less: Selling and Administrative Expenses		204,000
Net Income		$ 60,750

3.

	Cost before Proration of Overapplied Overhead	Proration of Overapplied Overhead
Work in Process Inventory	$ 53,100	$ 2,151
Finished Goods Inventory	95,850	3,883
Unadjusted Cost of Goods Sold	147,250	5,966
	$ 296,200	$ 12,000