DTrump Co uses a orphanages and homesforthe aged Planned for

DTrump Co. uses a orphanages and homesforthe aged. Planned for the upcoming year on 1/1 Direct Labor Overhead Direct Material job order cost system in the production of unique demolition equipmont of S-24 09,000 3.040,000 applied on basis of direct labor cost 7,200,000 The corany had one pas a wiP at mi e of the year Job DT 715 Total Cost The Company had two jobs in finished goods at the beginning of the year Total Cost 480,000 DT 600 DT 630 720,000 1,080,000 $ During the year actual costs were as of 1231 Direct Labor 2,760,000 Overhead 4,531,200 Direct Material 8,064,000 There was one job remaining in finished goods at year end Job A 796 Total Cost There was one job remaining in ending WP Job A 801 Total Cost Required: Calculate the applied overhead rate and use in determining value of WIP, Finished Goods and Cost of Goods Sold 1,404,000 $ 1,825,200 Indicate whether overhead was under or over applied and dispose of amount in appropriate manner If sales for the year were $15,000,000 and operating expense was $2,200,000, prepare an income statement for the year and indicate the value of ending inventory on the balance sheet.

Solution

Applied overhead rate=Estimated overhead/Estimated direct labor=3840000/2400000=$1.6 per Direct labor $ Work-in-progress expenses during the year: Direct material 8064000 Direct labor 2760000 Overhead (2760000*1.6) 4416000 15240000 Job cost transferred to Finished goods from work-in-progress: Beginning balance 480000 Add:Work-in-progress expenses during the year 15240000 15720000 Less:Ending balance 1825200 Transferred to finished goods 13894800 Cost of goods sold: Analyze finished goods account Beginning balance (720000+1080000) 1800000 Add:Transfer from work in process 13894800 15694800 Less:Ending balance 1404000 Amount transferred to cost of goods sold 14290800 Actual overhead=4531200 Applied overhead=4416000 Under applied overhead=4531200-4416000=115200 Dispose of the under applied overhead by transferring to cost of goods sold Cost of goods sold balance will be=14290800+115200=14406000 Income statement Sales 15000000 Less: Cost of goods sold 14406000 Gross profit 594000 Less: Operating expenses 2200000 Net operating loss -1606000 Balance sheet: Inventory: Work-in-progress 1825200 Finished goods 1404000 3229200