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 $6,200 for direct materials, $9,400 for direct labor, and $6,674 for overhead on its job cost sheet Job W, which is still in process at year-end, shows charges of $2.800 for direct materials and $5,100 for direct labor Required: 1a. Should any overhead cost be applied to Job W at year-end? O Yes O No 1b. How much overhead cost should be applied to Job W? ead cost 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 year? O Raw Materials O Work-in-Process O Finished Goods

Solution

CALCULATION OF THE RECOVERY RATE OF OVERHEAD Overhead Rate = Total Overhead / Total Direct Labour Recovery Rate = Total Ovehead = $                6,674.00 Divide By \"/\" By   Direct Labour $                9,400.00 Overhead Rate =                             0.71 Overhead Rate in % = 71% Overhead rate is 71% of direct labour cost Answer = 1(A) Yes, Overhead cost will be applied on Job W at the year end Answer = 1(B) Ovehrad Cost = Direct Labour Cost X 71% Ovehrad Cost = $ 5100 X 71% Ovehrad Cost = $ 3,621 Answer = Overhead Cost = $                      3,621 Answer =2 In the Financial statement cost included in Job W\'s will be reported as Work-In-Process Answer = Option 2 = Work - In- Process