Question

The computer workstation furniture manufacturing that Santana Rey started in January is progressing well. As of the end of June, Business Solutions's job cost sheets show the following total costs accumulated on three furniture jobs
Job 602 Job 603 Job 604
Direct Materials $1,700 $3,100 $2,600
Direct labor 1,000 1,340 1,800
Overhead 500 670 900
Job 602 was started in production in May, and these costs were assigned to it in May: direct materials, $500; direct labor, $250; and overhead, $125. Jobs 603 and 604 were started in June. Overhead cost is applied with a predetermined rate based on direct labor costs. Jobs 602 and 603 are finished in June, and Job 604 is expected to be finished in July. No raw materials are used indirectly in June. (Assume this company’s predetermined overhead rate did not change over these months).

1. What predetermined overhead rate is used in June?
2. How much cost is transferred to finished goods inventory in June?

Answer 1

Answer:

1. 50%

2. $8,310

Explanation:

1. The computation of predetermined overhead rate is used in June is shown below:-

Predetermined overhead rate = Overhead Cost ÷ Direct labor Cost

= $125 ÷ $250

= 50%

2. The computation of cost is transferred to finished goods inventory in June is shown below:-

Job    Raw       Direct  Overhead   Total      Cost transferred

        material   labor   applied       Cost     to finished goods

602  $1,700        $1,000    $500   $3,200    $3,200

603  $3,100       $1,340     $670    $5,110      $5,110

604  $2,600      $1,800    $900    $5,300

Total

cost  $7,400     $4,140    $2,070   $13,610    $8,310

The total cost is comprise of raw material, direct labor and overhead applied

And since Job 602 and 603 are finished in June so the same is to be considered and The job 604 is expected to finished in July so the same is not relevant