A company adds overhead costs to jobs at the rate of $8 per direct labor hour. I

Question

A company adds overhead costs to jobs at the rate of $8 per direct labor hour. It accumulates overhead costs in a seperate manufacturing overhead account and uses normal costing to assign overhead. The following data provide details of the company's activity and balances during the last half of the year:

                                                       July 1                                         December 1

DM inv.                                        $62,250                                       $63,750

Work in Proc. Inv.                        46,000                                           45,500

Fin. Goods Inv.                            26,150                                            25,000

Monthly production data:

Direct mat. Purch.                     157,000

Direct Labor cost                        272,000

a) Calculate the cost of direct materials used during the period.

b) Calculate the cost of goods manufactured during the period.

c) At the end of December, the company found that it had actually incurred overhead cost of $123,000. IF the company adjusts over or underapplied overhead to cost of goods sold at the end of the year, what is the cost of goods sold after adjustment?

Explanation / Answer

A company adds overhead costs to jobs at the rate of $8 per direct labor hour. It accumulates overhead costs in a seperate manufacturing overhead account and uses normal costing to assign overhead. The following data provide details of the company's activity and balances during the last half of the year:

July 1 December 1

DM inv. $62,250 $63,750

Work in Proc. Inv. 46,000 45,500

Fin. Goods Inv. 26,150 25,000

Monthly production data:

Direct mat. Purch. 157,000

Direct Labor cost 272,000

a) Calculate the cost of direct materials used during the period.

b) Calculate the cost of goods manufactured during the period.

No of Direct Labor Hour = 272000/17 = 16000 Hour

c) At the end of December, the company found that it had actually incurred overhead cost of $123,000. IF the company adjusts over or underapplied overhead to cost of goods sold at the end of the year, what is the cost of goods sold after adjustment?

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