Predetermined Overhead Rate, Application of Overhead to Jobs, Job Cost, Unit Cos

Question

Predetermined Overhead Rate, Application of Overhead to Jobs, Job Cost, Unit Cost

On August 1, Cairle Company’s work-in-process inventory consisted of three jobs with the following costs:

During August, four more jobs were started. Information on costs added to the seven jobs during the month is as follows:

Before the end of August, Jobs 70, 72, 73, and 75 were completed. On August 31, Jobs 72 and 75 were sold.

Required:

1. Calculate the predetermined overhead rate based on direct labor cost.
  % of direct labor cost.

2. Calculate the ending balance for each job as of August 31.

3. Calculate the ending balance of Work in Process as of August 31.
$

4. Calculate the cost of goods sold for August.
$

5. Assuming that Cairle prices its jobs at cost plus 20 percent, calculate Cairle’s sales revenue for August.
$

Explanation / Answer

Answer 1. Predetermined Overhead Rate = Applied Overhead / Direct Labour X 100 Predetermined Overhead Rate= Job 70 = 1425 / 1900 X 100 = 75% (If, we calculate with Job 71 or Job 72, we will get the same overhead rate) Answer 2. Job.70 Job.71 Job.72 Job.73 Job.74 Job.75 Job.76 Opening WIP            4,925          4,275          2,425                 -                   -                   -                  -   Add: Direct Material                800          1,235          3,550          5,000             300             560               80 Add: Direct Labor            1,000          1,400          2,200          1,800             600             860             172 Add: Applied Overhead (75% 0f Direct labor)                750          1,050          1,650          1,350             450             645             129 Ending Balance            7,475          7,960          9,825          8,150          1,350          2,065             381 Answer 3. Calculation of Ending WIP at the End on Aug. 31 Job Amount Job.71            7,960 Job.74            1,350 Job.76                381 Total WIP at the end            9,691 Answer 4. Calculation of Cost og Goods Sold For Aug. Job Amount Job.72            9,825 Job.75            2,065 Total          11,890 Answer 5. Calculation of Sales Revenue For Aug. Particulars Amount Cost of Goods Sold          11,890 Add: Profit / Margin (20% of 11890)            2,378 Sales Revenue          14,268

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