Sweeten Company had no jobs in progress at the beginning of March and no beginni
ID: 2376513 • Letter: S
Question
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. It started only two jobs during March%u2014Job P and Job Q. Job P was completed and sold by the end of the March and Job Q was incomplete at the end of the March. The company uses a plantwide predetermined overhead rate based on direct labor-hours. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):
Estimated total fixed manufacturing overhead: $10,000
estimated variable manufacturing overhead per direct labor hour: $1.00
estminated total labor hours to be worked: $2000
total actual manufacturing cost incurred: $12,500
JOB P:
Direct materials: $13,000
Direct labor cost: $21,000
Actual direct labor hours worked: 1,400
JOB Q:
Direct Materials: $8,000
Direct labor cost: $7,500
Actual direct labor hours worked: 500
1. What is the company's predetermined overhead rate?
2. How much manufacturing overhead was applied to Job P and Q?
3. What is direct labor hourly wage rate?
4. If Job P included 20 units, what is its unit product cost? What is the total amount of manufacturing cost assigned to Job Q as of the end of March (including applied overhead?)
Explanation / Answer
In December 2008, Jens Company established its predetermined overhead rate for jobs produced during
year 2009 by using the following cost predictions: overhead costs, $1,500,000, and direct labor costs,
$1,250,000. At year end 2009, the company%u2019s records show that actual overhead costs for the year are
$1,660,000. Actual direct labor cost had been assigned to jobs as follows.
Jobs completed and sold . . . . . . . . . . . . . . . $1,027,500
Jobs in finished goods inventory . . . . . . . . . 205,500
Jobs in goods in process inventory . . . . . . . 137,000
Total actual direct labor cost . . . . . . . . . . . . $1,370,000
1. Determine the predetermined overhead rate for year 2009.
2. Set up a T-account for Factory Overhead and enter the overhead costs incurred and the amounts
applied to jobs during the year using the predetermined overhead rate.
3. Determine whether overhead is overapplied or underapplied (and the amount) during the year.
4. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold.
Answer:
1. Determine the predetermined overhead rate for year 2009.
$1,500,000 / $1,250,000 = 120% of Direct labor cost
2. Set up a T-account for Factory Overhead and enter the overhead costs incurred and the amounts
applied to jobs during the year using the predetermined overhead rate.
Manufacturing Overhead
_______________________________________%u2026
Cash $1,660,000 WIP Inventory $1,644,000
_______________________________________%u2026
3. Determine whether overhead is over-applied or under-applied (and the amount) during the year.
Overhead Applied $1,644,000
Less: Actual overhead $1,660,000
Overhead under applied $16,000
4. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold.
_______________________________________%u2026
Cost of goods sold $16,000
Manufacturing Overhead $16,000
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