In December 2018, West Corporation’s manager estimated next year’s total direct labor cost assuming 10 persons working an average of 2,000 hours each at an average wage rate of $20 per hour.The manager also estimated the following manufacturing overhead costs for 2019.
|
Indirect labor |
$75,000 |
|
Factory supervision |
100,000 |
|
Rent on factory building |
50,000 |
|
Factory utilities |
100,000 |
|
Factory insurance |
10,000 |
|
Depreciation – factory equipment |
500,000 |
|
Repairs expense – factory equipment |
50,000 |
|
Factory supplies used |
20,000 |
|
Miscellaneous production costs |
5,000 |
|
Total estimated overhead costs |
$910,000 |
At the end of 2019, records show that the company incurred $850,000 of actual overhead costs.It completed and sold five jobs with the following direct labor costs:Job 100, $100,000; Job 101, $80,000; Job 102, $50,000; Job 103, $120,000; Job 104, $40,000.In addition, Job 105 is in process at the end of 2019 and had been charged $25,000 of direct labor.Direct material costs for each of the jobs were as follows:Job 100, $63,000; Job 101, 42,000; Job 102 35,000; Job 103, 78,000; Job 104 39,000; Job 105, 45,000.No jobs were in the process at the beginning of 2019.The company’s predetermined overhead rate is based on direct labor cost.
Required
- Determine the predetermined overhead rate for 2019.
- Determine the total overhead cost applied to each of the six jobs during 2019.
- Determine the total cost of each of the six jobs at the end of 2019.
- Determine the dollar amount that would be transferred from work in process inventory to finished goods inventory and ultimately to cost of goods sold in 2019.
- Determine the dollar amount that would remain in work in process inventory at the end of 2019.
- Determine the over-or under-applied overhead at the end of 2019.
- How would you recommend closing out the over- or under-applied overhead?
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