Question

Sigma Corporation applies overhead cost to jobs on the basis of direct labor cost. Job V, which was started and completed during the current period, shows charges of $6,100 for direct materials, $9,600 for direct labor, and $6,432 for overhead on its job cost sheet. Job W, which is still in process at year-end, shows charges of $3,200 for direct materials and $5,900 for direct labor.
Required: (for the following questions show your work and explain the answers.)

1a. Should any overhead cost be applied to Job W at year-end?

Yes
No
1b. How much overhead cost should be applied to Job W?

Overhead cost? _____
2. How will the costs included in Job W's job cost sheet be reported within Sigma Corporation's financial statements at the end of the year?

Raw Materials _____
Work-in-Process _____
Finished Goods _

Answer 1

Answer:

Question 1

a) yes

b) 5,900 direct labor x .67 rate = 3,953 dollars

Question 2

Work in process: 13,053

Explanation:

Taking job V as a template we can solve for the predeterminate overhead rate:

9,600 direct labor

generates 6,432 overhead:

6,432/9,600 = 0.67

eahc dollar is charged with $0.67 overhead

Total cost accumulated for Job W:

3,200 raw materials

5,900 direct labor

3,953 overhead

13,053 total cost. As it is not compelte It will be considered work in process.