Erie Company uses a job order cost accounting system. Four jobs were started dur
ID: 2502571 • Letter: E
Question
Erie Company uses a job order cost accounting system. Four jobs were started during the current year. The following is a record of the costs incurred:
Job numbers
Material used
Direct labor used
Direct labor hours used
10
$45
$72
$8
11
59
77
7
12
35
30
3
13
26
40
5
Actual overhead costs were $55. The predetermined overhead allocation rate is $2.40 per direct labor hour. During the year, jobs 10, 11, and 13 were completed. Also, jobs 10 and 13 were sold for $387. Assuming that this is Erie
Job numbers
Material used
Direct labor used
Direct labor hours used
10
$45
$72
$8
11
59
77
7
12
35
30
3
13
26
40
5
Explanation / Answer
A) Calculate the balance in the goods in process inventory, finished goods inventory, and the cost of goods sold accounts. Show all calculations
goods in process inventory (only Job 12) = $35 + $30 + $2.4 x 3 = $72.2
finished goods inventory ( Job 11) = $59 + $77 + $2.4 x 7 = $152.8
the cost of goods sold accounts ( Job 10 and Job 13 and over applied amount transferred from Factory overhead)
= cost of Job 10 + Cost of Job 13 - Over applied overhead
= ($45 + $72 + $8 x 2.4) + ($26 + $40 + 5 x $2.4) - $0.2
= $136.2 + $78 - $0.2
= $214
B) Does the factory overhead account balance indicate an over-or underapplication or overhead? Prepare the entry to close this out assuming the amount
Ans:) Calculation of over or under appliction of over head = Actual Overhead - Applied Overhead
= ( $55 - (8+7+3+5) x $2.4) ==> $55 - $55.20 = - $0.20 ( Over application of overhead)
the entry to close this out assuming the amount is as below :
Factory Overhead Account Debit $0.20
To Cost of Goods Sold Account Credit $0.20
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