Question

ICP 3 Avengers United assigns costs to its products using a job order costing system. The company assembles and packages 30 different products based on individual customer orders. Each order has a distinct job number. On April 1, the company had the following amounts in inventory: Direct materials $ 11,700 Work-in-process $ 68,589 Finished goods $ 35,280 Included in the work-in-process account are the following jobs: A1 B2 Direct materials $ 6,300 $ 4,785 Direct labour 12,750 10,815 Overhead applied - 7.650 6.489 Total $26,700 $22,089 $ 4,200 9,750 5.850 $19,800 Included in the finished goods account are the following costs: D4 Direct materials $10,800 Direct labour 15,300 Overhead applied 9.180 Total $35,280 The data for jobs started during the month of April are as follows: E5 F6 G7 Direct materials $ 6,270 $5,400 $1,800 Direct labour 13,800 12,510 4,365 The following were added to existing jobs during April: A1 B2 Direct materials $1,425 $ 615 Direct labour 3,000 5,250 C3 $1,800 6.750 Actual overhead expenses for April were as follows: • Supervisory salaries $ 6,000 • Factory rent 3,000 • Machine depreciation 4,500 • Indirect labour 7,500 • Factory supplies 1,650

Answer 1

	Overhead application rate=Overhead applied/Direct labor
	For this purpose,consider any job
	Let's take Job A1
	Overhead application rate=7650/12750=$ 0.6 per direct labor cost
a)					B2
	Beginning cost in work in process				22089
	Add: Current period costs
	Direct materials				615
	Direct labor				5250
	Overhead applied		(5250*0.6)		3150
	Total cost				31104
b)	Apr 30 balances of Direct materials:
					$	$
	Beginning balance					11700
	Add:Materials purchased					12750
						24450
	Less:Materials issued
	E5				6270
	F6				5400
	G7				1800
	A1				1425
	B2				615
	C3				1800	17310
	Ending balance					7140
	Apr 30 balances of work-in-process=Cost of Jobs in process=Cost of F6 and G7
					F6	G7	Total
	Direct materials				5400	1800
	Direct labor			a	12510	4365
	Overhead applied			a*0.6	7506	2619
	Total cost				25416	8784	34200
	Apr 30 balances of finished goods=Cost of Jobs in finished goods=Cost of C3
					C3
	Beginning cost in work in process				19800
	Add: Current period costs
	Direct materials				1800
	Direct labor			a	6750
	Overhead applied			a*0.6	4050
	Total cost				32400
c)	Cost of goods manufactured
						$	$
	Beginning materials inventory					11700
	Plus: Raw material purchases					12750
	Total direct materials available					24450
	Less: Ending raw materials inventory (Dec 31)					7140
	Direct materials used						17310
	Direct labor:
	A1					3000
	B2					5250
	C3					6750
	E5					13800
	F6					12510
	G7					4365	45675
	Overhead applied			(45675*0.6)			27405
	Total current manufacturing cost						90390
	Plus: Beginning work in process inventory						68589
	Total manufacturing cost						158979
	Less: Ending work in process inventory						34200
	Cost of goods manufactured						124779
d)	Actual overhead:
					$
	Supervisory salaries				6000
	Factory rent				3000
	Machine depreciation				4500
	Indirect labor				7500
	Factory supplies				1650
	Factory employee benefits				3840
	Total				26490
	Note:Selling expenses are not part of factory overhead.
	Applied overhead=$ 27405
	Applied overhead > Actual overhead.
	Hence,overhead is over-applied
	Over-applied overhead=27405-26490=$ 915