Batchelor Company manufactures custom accounting ledgers using a job-order costi

Question

Batchelor Company manufactures custom accounting ledgers using a job-order costing system. Manufacturing Overhead is applied to each job as a predetermined rate of 150% of Direct Labor cost. Any under applied overhead is prorated between work in process, Finished Goods, and Cost of Goods Sold based on the amount of manufacturing overhead in their ending balances at the end of each month.

Additional formation:

1. Job 100 was completed but unsold as of 1/31/2016 with actual incurred costs as follows: Direct materials = $3,900 and Direct Labor =$ 2,400

2. Job 101 was the only job in process on 1/31/2016 with actual incurred costs as follows: Direct Materials = $3,300 and Direct Labor = $2,700

3. Job 102, 103, 104, and 105 were started on February 2016

4. Direct Material used in production during February totaled $16,000

5. The total Cost of Goods Manufactured for February was $68,750

6. Actual manufacturing Overhead was $36,000 for February

7. The only job still in process on 2/28/2016 was job 105 which has actual incurred costs of $2,800 for Direct Materials and $1,800 for Direct Labor

8. The only completed job left unsold on 2/28/2016 was job 104 which has actual incurred costs of $3,500 for direct materials and $4,500 for direct labor

A. Calculate the Cost of Goods for Febuary after closing the under/over applied overhead.

Explanation / Answer

Batchelor Company Balance on 01/31/2016 Finished goods Job 100 Cost Details Amt $ Direct Materials                 3,900 Direct Labor                 2,400 Manufacturinh OH @150% of Direct Labor               3,600 Total Job 100               9,900 WIP Job No 101 Cost Details Amt $ Direct Materials                 3,300 Direct Labor                 2,700 Manufacturinh OH @150% of Direct Labor               4,050 Total Job 101            10,050 Position on 02/28/2016 WIP Job No 105 Cost Details Amt $ Direct Materials                 2,800 Direct Labor                 1,800 Manufacturinh OH @150% of Direct Labor               2,700 Total Job 105               7,300 Finished goods Job 104 Cost Details Amt $ Direct Materials                 3,500 Direct Labor                 4,500 Manufacturinh OH @150% of Direct Labor               6,750 Total Job 104            14,750 Cost of Goods Manufacured in Feb 2016            68,750 Direct Material used in Feb            16,000 Add : Opening WIP            10,050 Less Closing WIP            (7,300) Direct Labor & Overhead            50,000 Direct Labor =50000/2.5            20,000 Manufacturing OH            30,000 Overhead Incurred in Feb              36,000 OH applied in Feb            30,000 Underapplied OH               6,000 Cost og goods sold without OH adjustment Opening FG balance               9,900 Add cost of goods manufactured            68,750 Less Closing WIP          (14,750) Cost of goods sold Feb            63,900 Details for Feb 2016 Value without OH adjustment Ratio Overhead adjustment Adjusted Value WIP                 7,300 8.5%                 510         7,810 Finished Goods            14,750 17.2%             1,030       15,780 Cost of goods sold            63,900 74.3%             4,461       68,361 Total            85,950             6,000       91,950

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