Jackson Company applies overhead to products using a pre-determined rate of $11.
ID: 2558678 • Letter: J
Question
Jackson Company applies overhead to products using a pre-determined rate of $11.20 per direct labor hour. During 2019, Jackson Company began work on three jobs. Information relating to these three jobs appears below: Job #359 Job #360 Job #361 direct materials .............. $98,000 $75,000 $91,000 direct labor cost ............. $98,600 $79,900 $86,700 direct labor hours ............ 5,800 4,700 5,100 By the end of 2019, job #359 and job #361 had been completed. Job #360 was not completed by the end of 2019. Additionally, by the end of 2019, job #361 had been sold while job #359 was not sold. Jackson Company had total actual overhead cost of $169,000 during 2019. Calculate the cost of goods sold reported by Jackson Company for 2019 after the overhead variance has been closed.
Explanation / Answer
Solution:
Primary Working:
Job 359
Job 360
Job 361
Total
Direct materials
$98,000
$75,000
$91,000
$264,000
Direct labor Cost
$98,600
$79,900
$86,700
$265,200
Applied Manufacturing Overhead
(Direct labor hours x $11.20)
$64,960
$52,640
$57,120
$174,720
Total Manufacturing Cost
$261,560
$207,540
$234,820
$703,920
Status at the end of 2019
Completed and Not Sold
Not Completed
Completed and Sold
Cost of Goods Sold before overhead adjustment (Cost of Job 361 Since it is sold)
$234,820
Less: Over-applied overhead (refer Note)
($5,720)
Cost of Goods Sold to be reported for 2019 after overhead variance has been closed
$229,100
Note -- Calculation of Overhead Variance:
Total Applied Manufacturing Overhead = $174,720
Actual Overhead Incurred = $169,000
Applied Overhead is higher than actual incurred overhead, it means the overhead are overapplied.
Over Applied Overhead =$174,720 - $169,000 = $5,720
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Job 359
Job 360
Job 361
Total
Direct materials
$98,000
$75,000
$91,000
$264,000
Direct labor Cost
$98,600
$79,900
$86,700
$265,200
Applied Manufacturing Overhead
(Direct labor hours x $11.20)
$64,960
$52,640
$57,120
$174,720
Total Manufacturing Cost
$261,560
$207,540
$234,820
$703,920
Status at the end of 2019
Completed and Not Sold
Not Completed
Completed and Sold
Cost of Goods Sold before overhead adjustment (Cost of Job 361 Since it is sold)
$234,820
Less: Over-applied overhead (refer Note)
($5,720)
Cost of Goods Sold to be reported for 2019 after overhead variance has been closed
$229,100
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