Degelman Company uses a job order cost system and applies overhead to production

Question

Degelman Company uses a job order cost system and applies overhead to production on the basis of direct labor costs.

Problem 15-1A (Part Level Submission) Degelman Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2014, Job No. 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $ 24,600, direct labor $14,760, and manufacturing overhead $ 19,680. As of Danuary 1, Job No. 49 had been completed at a cost of $ 110,700 and was part of finished goods inventory. There was a $ 18,450 balance in the Raw Materials Inventory account. During the month of January, Deglman Manufacturing began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $ 150,060 and $ 194,340, respectively. The following additional events occurred during the month 1. Purchased additional raw materials of $ 110,700 on account. 2. Incurred factory labor costs of $ 86,100. Of this amount $ 19,680 related to employer payroll taxes. 3. Incurred manufacturing overhead costs as follows: indirect materials $ 20,910 indirect labor $ 24,600 ; depreciation expense on equipment $ 23,370 and various other manufacturing overhead costs on account $ 19,680 Assigned direct materials and direct labor to jobs as follows 4. Job No 50 51 52 Direct Materials Direct Labor $ 12,300 47,970 36,900 6,150 30,750 24,600 (a) Your answer is correct. Calculate the predetermined overhead rate for 2014, assuming Degelman Company estimates total manufacturing overhead costs of $ 1,205,400, direct labor costs of $ 861,000 , and direct labor hours of 24,600 for the year. (Round answer to the nearest whole percent, e.g. 25.) Predetermined overhead rate 140

Explanation / Answer

(a) Predetermined Overhead rate = Estimated overhead cost/ Direct labour cost = $1205400 / $86100 = 1.4 = 140%

(b)

Note: Manufacturing overhead has been calculated @ 140% of direct labour cost for each ofthe jobs 50, 50 and 51.

Job No. 50 date direct material direct labour Manufacturing overhead Jan-01 24600 14760 19680 January 12300 6150 8610 36900 20910 28290 Cost of completed Job: Direct materials 36900 direct labaour 20910 Manufacturing Overhead 28290 Total cost 86100

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