Job Number A23 C76 G15 Direct labor ($8/hour) $24,000? $8,800 Direct materials $42,000 $61,000? Overhead applied? $24,750 $6,050.

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1 4-33 Dollars Company uses a job costing system that applies factory overhead on the basis of direct labor. No job was in process on February 1. During the month of February, the company worked on these three jobs. During the month, the company completed and transferred Job A23 to the finished goods inventory. Jobs C76 and G15 were not completed and remain in work in process at the cost of $148,650 at the end of the month. Actual factory overhead costs during the month totaled $48,600. Job Number A23 C76 G15 Direct labor ($8/hour) $24,000? $8,800 Direct materials $42,000 $61,000? Overhead applied? $24,750 $6, What is the predetermined factory overhead rate? 2. Compute the amount of underapplied and overapplied overhead for February. 3. Compute the cost of direct materials issued to production during the month.

2 4-35 Norton Associates is an advertising agency in Columbus, Ohio. The company's controller estimated that it would incur $325,000 in overhead costs for Because the overhead costs of each project change in direct proportion to the amount of direct professional hours incurred, the controller decided that overhead should be applied on the basis of professional hours. the controller estimated 25,000 professional hours for the year. During October, Norton incurred the following costs to make a 20-second TV commercial for Central Ohio Bank. Actual overhead costs to make the commercial totaled $14,700. The industry customarily bills customers at 150 percent of total cost. Direct Materials $32,000 Direct professional hours 1,200 Cost per professional hour $50 Estimated overhead costs $325,000 Estimated professional hours 25,000 Actual overhead costs for commercial $16,500 Billing rate on cost 150% 1. Compute the predetermined overhead rate. 2. What is the total amount of the bill that Norton will send Central Texas Bank?

3 4-40 The following information is for Shiller Company for July 2010: Facts and Figures about Shiller Company March 2010 Jobs: Job 1467 Job 1469 Predetermined Labor Hour Rate Labor Hours: Status: Ship Date: Gross Margin: ,175 Completed July 24% ,275 In Process NA NA The company purchased the following direct materials and indirect materials: Material A $76,000 Material B $57,000 Indirect Materials $14,250 TOTAL: $147,250 Direct materials and indirect materials used are as follows: Job 1467 Job 1469 TOTAL Material A $28,500 $71,250 $99,750 Material B $9,500 $33,250 $42,750 Subtotal: $38,000 $104,500 $142,500 Indirect Materials $199,500 TOTAL: $342,000 Factory labor incurred for the two jobs and indirect labor is as follows: Job 1467 $76,000 Job 1469 $57,000 Indirect Labor $133,000 TOTAL: $266,000 The company closed the overapplied or underapplied overhead to the Cost of Goods Sold account at the end of July. 1. Calculate the amount of overapplied and underapplied overhead and state whether the cost of goods sold account will be increased or decreased by the adjustment. 2. Calculate the total manufacturing cost for Job 1467 and Job 1469 for July 2010.

4 Chapter Working with Unknowns 1. From Job G15: $6,050/$8,800 = overhead rate 2. Job A23: $24,000 x = $16,500 applied overhead Total applied overhead: A23 $16,500 C76 24,750 G15 6,050 $47,300 $48,600 - $47,300 = $1,300 underapplied overhead 3. For Job C76: $24,750 /.6875 = $36,000 direct labor Therefore, $148,650 - ($36,000 + $61,000 + $24,750) ($8,800 + $6,050) = $12,050 direct materials for Job G15 $42,000 + $61,000 + $12,050 = $115,050 cost of direct materials issued 4-35 Service Industry; Overhead Rate, Pricing 1. Predetermined Overhead Rate = $325,000 / 25,000 hours = $13 per professional hour 2. Total Cost = $32,000 + ($50 x 1,200) + ($13 x 1,200) = $32,000 + $60,000 + $15,600 = $107,600 Total Revenue = $107,600 x 150% = $161,400 1

5 Chapter Job Costing 1. Underapplied OH = $31, Total Mfg cost for Job 1467= $357,913; for Job 1469 = $330,363 Data Section Direct Materials Direct Labor Labor Hours Job 1467 $ 76,000 6,175 Material A $ 28,500 Material B 9,500 Job 1469 $ 57,000 4,275 Material A $ 71,250 Material B 33,250 Factory Overhead Applied $39.50 per machine hr 10,450 Solution Factory Overhead Analysis Actual Factory OH Indirect Materials $199,500 Indirect Labor 133,000 Utilities 14,250 Depreciation 85,500 Insurance 11,875 Total Actual Factory OH $444,125 Less: Applied Factory OH 412,775 (10,450 x $39.50) Under/overapplied Factory O $31,350 UNDERAPPLIED Adjust Difference to COGS 31,350 Increase in Cost of Goods Sold Breakdown of Job Costs Job 1467 Job 1469!"#$% Total Direct Materials Cost $38,000 $104,500 Total Direct Labor Cost 76,000 57,000 Applied Overhead Machine Hours 6,175 4,275 Application rate $39.50 $39.50 Total Applied Overhead Cost 243, ,863!"#$%&&' Total Manufacturing Costs $357,913 $330,363 2