Exercise 3-9 Applying Overhead to a Job [LO5] Sigma Corporation applies overhead
ID: 2388139 • Letter: E
Question
Exercise 3-9 Applying Overhead to a Job [LO5]Sigma Corporation applies overhead cost to jobs on the basis of direct labor cost. Job V, which was started and completed during the current period, shows charges of $5,000 for direct materials, $8,000 for direct labor, and $6,000 for overhead on its job cost sheet. Job W, which is still in process at year-end, shows charges of $2,500 for direct materials and $4,000 for direct labor.
Required:
Calculate the overhead cost to be added to Job W at year-end. (Omit the "$" sign in your response.)
Overhead cost $ ____________
Explanation / Answer
Exercise 3-9 Yes, overhead should be applied to value the Work in Process inventory at year-end. Because $6,000 of overhead was applied to Job V on the basis of $8,000 of direct labor cost, the company’s predetermined overhead rate must be 75% of direct labor cost. Job W direct labor cost $4,000 × Predetermined overhead rate × 0.75 = Manufacturing overhead applied to Job W at year-end $3,000
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