In December 2012, West Corporation’s manager estimated next year’s total direct labor cost assuming 20 persons working an average of 2,000 hours each at an average wage rate of $25 per hour. The manager also estimated the following manufacturing overhead costs for 2018.
|Indirect labor||$ 50,000|
|Rent on factory building||60,000|
|Depreciation – factory equipment||400,000|
|Repairs expense – factory equipment||180,000|
|Factory supplies used||20,000|
|Miscellaneous production costs||30,000|
|Total estimated overhead costs||$900,000|
At the end of 2013, records show that the company incurred $925,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 720, $275,000; Job 721, $200,000; Job 722, $150,000; Job 723, $300,000; Job 724, $105,000. In addition, Job 725 is in process at the end of 2017 and had been charged $50,000 of direct labor. Direct material costs for each of the jobs were as follows: Job 720, $210,000; Job 721, 140,000; Job 722 110,000; Job 723, 260,000; Job 724 130,000; Job 725, 150,000. No jobs were in the process at the end of 2017. The company’s predetermined overhead rate is based on direct labor cost.
- Determine the predetermined overhead rate for 2018.
- Determine the total overhead cost applied to each of the six jobs during 2018.
- Determine the total cost of each of the six jobs at the end of 2018.
- Determine the dollar amount that would be transferred from work in process inventory to finished goods inventory and ultimately to cost of goods sold in 2018.
- Determine the dollar amount that would remain in work in process inventory at the end of 2018
- Determine the over-or under-applied overhead at the end of 2018.
- How would you recommend closing out the over- or under-applied overhead
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