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 $ 1,500 $ 3,200 $ 3,100
Direct labor 1,000 1,520 2,300
Overhead 400 608 920
Job 602 was started in production in May, and these costs were assigned to it in May: direct materials, $400; direct labor, $250; and overhead, $100. 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.)


Required:
1. What is the cost of the raw materials used in June for each of the three jobs and in total?
2. How much total direct labor cost is incurred in June?
3. What predetermined overhead rate is used in June?
4. How much cost is transferred to finished goods inventory in June?

What is the cost of the raw materials used in June for each of the three jobs and in total?

Job 602 Job 603 Job 604 Total
May costs
June costs
Total
What predetermined overhead rate is used in June?

Predetermined overhead rate

How much total direct labor cost is

How much cost is transferred to finished goods inventory in June?

Job Raw Materials Direct Labor Overhead Applied Total Cost Cost transferred to finished goods Costs of Ending WIP
602
603
604
Total
incurred in June?

Job 602 Job 603 Job 604 Total
May costs
June costs
Total

Answer 1

Answer:

1. Cost of the raw materials $8200

2. Total Direct Labor In June $ 2520

3. Predetermined Overhead Rate 40%

4. Cost transferred to finished goods $ 8978

Costs of Ending WIP $ 6320

Explanation:

1. Cost of the raw materials $8200

Job 602 $ 1500

Job 603 $ 3200

Job 604 $3100

Total May Costs $400

Total Job Costs = Jobs, 602+ 603+ 604= $7800

2. Total Direct Labor In June $ 2520

Job 602 $1000

Job 603 $1520

3. Predetermined Overhead Rate= Overhead Cost/ Direct labor Cost

Job602 = 400/1000 *100= 40%

Job 603= 608/1520 *100 = 40%

4. Cost transferred to finished goods

Job                           602              603            604

Raw Materials $ 1,500+400     $ 3,200       $ 3,100

Direct labor       1,000 +250       1,520          2,300

Overhead Applied 400+100        608             920

Total Cost              3650             5328              6320

Cost transferred to finished goods = 3650 + 5328= 8978

Costs of Ending WIP $ 6320

Completed jobs are sent to finished goods and incomplete job are in the ending work in process inventory.