Kansas Company uses a job costing accounting system for its

Kansas Company uses a job costing accounting system for its production costs. The company uses a predetermined overhead rate based on direct labor-hours to apply overhead to individual jobs. The company prepared an estimate o overhead costs at different volumes for the current year as follows Direct labor-hours Variable overhesd costs Fixed overhead costs 180.000 210,000 $1,050,000 1,260,000 1,470,000 848.000 $1,608,000 1,008,000 S2.118.000 150.000 848,000 848,000 Total overhead The expected volume is 180,000 direct labor-hours for the entire year. The following information is for March, when Jobs 6023 and 6024 were completed. Inventories, March 1 Materials and supplies Work-in-process (Job 0023) Finished goods S 31.500 5 102,000 337,500 Purchases of materials and supplies 3 405,000 $ 45.000 Materials Materials and supplies requisitioned for production Job 6023 Job 0024 Job 6025 135,000 112.500 76,500 $ 342.000 Factory direct labor-hours (DLH) Job 6023 Job 6024 Job 6025 10,500 DLH .000 DLH 0,000 DLH Labor costs Direct labor wages (all hours8) Indirect labor wages (12.000 hours) Supervisory salaries 204,000 51.000 108.000 Building occupancy costs (heat, light, depreciation, otc) Factory facilities Sales and administrative offices S 19.500 7,500 Factory equipment costs Power Repairs and maintenance Other 12,000 4,500 5 24.000 (Note: Regardless of your answer to requirement [a], assume that the predetermined overhead rate is $9 per direct labor-hour. Use this amount in answering requirements [b] through [e].)

Solution

a. Compute the predetermined overhead rate predetermined overhead rate = Total Overhead at expected Direct labour hr / Total Expencted Direct labour hour = $1908000/180000 hrs = $10.60 per DLH b.Compute the total cost of Job 6023 when it is finished Opening WIP $        162,000 Direct materials $        135,000 Direct Labour $          84,000 [10500 DLH*$8 per hr] Overhead Applied $          94,500 [10500 DLH*$9 per hr] Total Cost $        475,500 c.How much of factory overhead cost was applied to Job 6025 during March? Applied Factory Overhead for Job6025 = No. of Direct Labour hrs*Predetermined overhead rate = 6000 DLH*$9/hr $    54,000.00 d. (d)What total amount of overhead was applied to jobs during March Total DLH for al the jobs = 10500 dlh+ 9000DLH+6000 DLH = 25500 DLH Total Applied Factory Overhead = Total No. of Direct Labour hrs*Predetermined overhead rate = 25500 DLH*$9/hr $ 229,500.00 (e)Compute actual factory overhead incurred during March Supplies $          18,000 Indirect labourwages $          51,000 Supervisory Salary $        108,000 Factory Facilities $          19,500 Factory Equipment Cost $          24,000 Total $        220,500 Company has incurred $220500 as actual overhead f. Cost of goods sold : 2,937,000 (= $2,940,000 ? $3,000) Credit it to COGS. The amount is clearly not material , so it is not worth the effort involved in prorating. If the difference werematerial, then the proper answer would be to prorate it between work-in-process inventory, finished goods inventory, and cost of goods sold.