Elite Custom Cabinetry Company produces custom cabinets ordered to exact measure
ID: 2415093 • Letter: E
Question
Elite Custom Cabinetry Company produces custom cabinets ordered to exact measure based on CAD drawings provided by kitchen remodeling firms. As of June 1, there was one order in production (job 5-3), and two new jobs were started in June (jobs 6-1 and 6-2). Job 5-3 had incurred costs as follows prior to the month of June: direct material, $4,600; direct labor, $6,550; overhead, $3,400. There were no finished goods, because orders ship out upon completion. Raw material inventory was $18,600 as of June 1. The following events occurred during June: 1. Purchased additional raw materials of $20,000. 2. Incurred direct labor hours of 640 hours at a rate of $24.00 during the month of June. 3. Incurred total manufacturing overhead costs of $18,400 during the month of June. 4. Assigned Direct materials and direct labor hours to jobs as follows: Actual Materials Hours Job 5-3 2,300 112 Job 6-1 8,700 320 Job 6-2 5,420 208 Totals 16,420 640 5. The company uses direct labor hours to assign overhead to individual jobs, and the predetermined overhead rate is $28.00 per hour, based on the budget of 600 labor hours per month. 6. Job 5-3 and 6-1 are completed and shipped in the month of June. Job 6-2 is in progress at month end. A. Calculate the completed cost of jobs 5-3 and 6-1. B. Calculate the cost of work in process (job 6-2). C. Calculate over or under applied overhead for hours worked and rate per hour. D. Calculate the actual overhead rate per hour. Elite Custom Cabinetry Company produces custom cabinets ordered to exact measure based on CAD drawings provided by kitchen remodeling firms. As of June 1, there was one order in production (job 5-3), and two new jobs were started in June (jobs 6-1 and 6-2). Job 5-3 had incurred costs as follows prior to the month of June: direct material, $4,600; direct labor, $6,550; overhead, $3,400. There were no finished goods, because orders ship out upon completion. Raw material inventory was $18,600 as of June 1. The following events occurred during June: 1. Purchased additional raw materials of $20,000. 2. Incurred direct labor hours of 640 hours at a rate of $24.00 during the month of June. 3. Incurred total manufacturing overhead costs of $18,400 during the month of June. 4. Assigned Direct materials and direct labor hours to jobs as follows: Actual Materials Hours Job 5-3 2,300 112 Job 6-1 8,700 320 Job 6-2 5,420 208 Totals 16,420 640 5. The company uses direct labor hours to assign overhead to individual jobs, and the predetermined overhead rate is $28.00 per hour, based on the budget of 600 labor hours per month. 6. Job 5-3 and 6-1 are completed and shipped in the month of June. Job 6-2 is in progress at month end. A. Calculate the completed cost of jobs 5-3 and 6-1. B. Calculate the cost of work in process (job 6-2). C. Calculate over or under applied overhead for hours worked and rate per hour. D. Calculate the actual overhead rate per hour.Explanation / Answer
A. Completed Cost of Jobs 5-3:
Direct Material : $ 4600
Direct Labour : $ 6550
Overheads: $ 3400
Material added during the month june : $2300
Labour during the month June: $ 2688 (112*24)
Overhead during the month June: $3220 (112*28.75)
Total Cost of the Job 5-3 = $ 22,758.
Completed Cost of Job 6-1:
Direct Materials: $ 8700
Direct Labour: $ 7680 (320*24)
Overheads: $9200 (320*28.75)
Total Cost of the Job 6-1 = $25,580
B. Cost of Work In Process (Job 6-2):
Direct Materials; $ 5420
Direct Labour: $ 4992 (208*24)
Overheads: $ 5980 (208*28.75)
Total Cost of Work in Process (Job 6-2) = $ 16,392
C. Calculation of over or under applied overheads for hours worked and rate per hour:
The Budgeted Overheads = $ 16800 for 600 hours i.e. $28 per hour
The actual Overheads incurred = $18400 for 640 hours i.e $ 28.75 per hour
That over recovery of Overheads.
The over recovery of overhead per hour = $ 0.75 per hour
D. Calculation of Actual Overhead per hour:
Actual Overhead Cost: $ 18400
Actual hours worked: 640
Actual overhead rate = $28.75 (18400/640)
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