Sigma Corporation applies overhead cost to jobs on the basis

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 $7000 for direct materials, $8,200 for direct labor, and $4,592 for overhead on its job cost sheet Job W, which is still in process at year-end, shows charges of $3,400 for direct materials and $5.500 for direct labor. 1a. Should any overhead cost be applied to Job W at year-end? Yes O No 1b. How much overhead cost should be applied to Job W? 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 Raw Materials Work-in Process

Solution

1a.

Yes

Overhead cost should be applied, since charges are shown under work-in-process.

1b.

Labor cost ratio V: W = 8,200: 5,500

Overhead of V = $4,592

Overhead of W = {(Overhead of V) ÷ Ratio of V} × Ratio of W

                        = {$4,592 ÷ 8,200) × 5,500

                        = $3,080 (Answer)

2.

It should be reported as “work-in-process”, since the job is not yet complete.