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Deluxe Design Company makes custom furniture. On December 1, there were two jobs in process, Job 683, with a cost of $14, 200 and Job 684 with a cost of $23, 500. Jobs 685, 686, and 687 were started during the month of December. Data on costs added during the month are as follows: The predetermined overhead rate for Deluxe Design Company is based on estimated direct labor costs of $100,000 and estimated factory overhead of $80,000. Job 685 was completed on December 17. Job 684 was completed on December 21 and the client was billed at cost plus 45%. All other jobs remained in process. A.) Determine the amount of overhead to apply to each job for the period. B.) Calculate the cost of work-in-process at the end of the month. C.) Calculate the cost of finished goods, assuming that finished goods inventory on December 1st was zero. D.) The actual overhead for December was $41, 100, calculate the overhead variance. E.) Calculate the sales price for Job #684. F.) Calculate the adjusted cost of goods sold for the month of December. G.) If selling and administrative expenses for the month totaled $5, 600, what is the company’s operating income for December?
Expert Answer
| WORKSHEET: | ||||||
| Job 683 | Job 684 | Job 685 | Job 686 | Job 687 | ||
| Beginning balance | 14200 | 23500 | ||||
| Costs added during the month: | ||||||
| Direct materials | 11000 | 8000 | 31400 | 16700 | 6000 | |
| Direct labor | 21000 | 6000 | 12300 | 8450 | 2500 | |
| Overhead applied at 80% of Direct labor cost | 16800 | 4800 | 9840 | 6760 | 2000 | 40200 |
| Total cost | 63000 | 42300 | 53540 | 31910 | 10500 | |
| Pre-determined overhead rate = Estimated factory overhead/Estimated direct labor costs | ||||||
| = 80000/100000 = 80% of direct labor cost. | ||||||
| A) Amount overhead applied to each job for the period: | ||||||
| Job 683 | Job 684 | Job 685 | Job 686 | Job 687 | ||
| Direct labor | 21000 | 6000 | 12300 | 8450 | 2500 | |
| Overhead applied at 80% of Direct labor cost | 16800 | 4800 | 9840 | 6760 | 2000 | |
| B) Cost of WIP at the end of the month: | ||||||
| Job 683 | Job 686 | Job 687 | ||||
| Beginning balance | 14200 | |||||
| Costs added during the month: | ||||||
| Direct materials | 11000 | 16700 | 6000 | |||
| Direct labor | 21000 | 8450 | 2500 | |||
| Overhead applied at 80% of Direct labor cost | 16800 | 6760 | 2000 | |||
| Total cost | 63000 | 31910 | 10500 | |||
| C) Cost of finished goods inventory: | Job 685 | |||||
| Beginning balance | ||||||
| Costs added during the month: | ||||||
| Direct materials | 31400 | |||||
| Direct labor | 12300 | |||||
| Overhead applied at 80% of Direct labor cost | 9840 | 38900 | ||||
| Total cost | 53540 | |||||
| D) Overhead variance = Actual overhead – Overhead assigned = 41100 – 40200 = $900 | Unfavorable | |||||
| E) Sales price for Job #684: | ||||||
| Cost of production of the job | 42300 | |||||
| Add: Mark up of 45% | 19035 | |||||
| Price of the Job | 61335 | |||||
| F) Adjusted cost of goods sold: | ||||||
| Cost of goods sold (Job # 684) before adjustment | 42300 | |||||
| Add: Underabsorbed overhead | 900 | |||||
| Adjusted cost of goods sold | 43200 | |||||
| G) Sales revenue | 61335 | |||||
| Less: Adjusted cost of goods sold | 43200 | |||||
| Gross profit | 18135 | |||||
| Less: Selling and administrative expenses | 5600 | |||||
| Operating income | 12535 | |||||
