Purdue University Managerial Accounting West Corporation Management Question
Question Description
In December 2018, West Corporation’s manager estimated next year’s total direct labor cost assuming 10 persons working an average of 2,000 hours each at an average wage rate of $20 per hour.The manager also estimated the following manufacturing overhead costs for 2019.
|
Indirect labor |
$75,000 |
|
Factory supervision |
100,000 |
|
Rent on factory building |
50,000 |
|
Factory utilities |
100,000 |
|
Factory insurance |
10,000 |
|
Depreciation – factory equipment |
500,000 |
|
Repairs expense – factory equipment |
50,000 |
|
Factory supplies used |
20,000 |
|
Miscellaneous production costs |
5,000 |
|
Total estimated overhead costs |
$910,000 |
At the end of 2019, records show that the company incurred $850,000 of actual overhead costs.It completed and sold five jobs with the following direct labor costs:Job 100, $100,000; Job 101, $80,000; Job 102, $50,000; Job 103, $120,000; Job 104, $40,000.In addition, Job 105 is in process at the end of 2019 and had been charged $25,000 of direct labor.Direct material costs for each of the jobs were as follows:Job 100, $63,000; Job 101, 42,000; Job 102 35,000; Job 103, 78,000; Job 104 39,000; Job 105, 45,000.No jobs were in the process at the beginning of 2019.The company’s predetermined overhead rate is based on direct labor cost.
Required
- Determine the predetermined overhead rate for 2019.
- Determine the total overhead cost applied to each of the six jobs during 2019.
- Determine the total cost of each of the six jobs at the end of 2019.
- 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 2019.
- Determine the dollar amount that would remain in work in process inventory at the end of 2019.
- Determine the over-or under-applied overhead at the end of 2019.
- How would you recommend closing out the over- or under-applied overhead?
