Heritage Gardens provides complete garden design and landscaping services. The c
ID: 2331903 • Letter: H
Question
Heritage Gardens provides complete garden design and landscaping services. The company uses a job-order costing system to track the costs of its landscaping projects. The table below provides data conceming the three landscaping projects that were in progress during May. There was no work in process at the beginning of May. Project Designer Direct materials Direct labor 140 $ 5,000 2,000 S 3,800 S 2,600 1,200 1,700 220 100 Actual overhead costs were $18,000 for May. Overhead costs are applied to projects on the basis of designer-hours because most of the overhead is related to the costs of the garden design studio. The predetermined overhead rate is $47 per designer-hour. The Williams and Chandler projects were completed in May; the Nguyen project was not completed by the end of the month. No other jobs were in process during May Required: 1. Compute the amount of overhead cost that would have been applied to each project during May. Williams Chandler Nguyen Overhead cost 2. Determine the cost of goods manufactured for May. ost of goods m 3. What is the accumulated cost of the work in process at the end of the month?Explanation / Answer
SOLUTION
1. Overhead costs = Designer hours * Predetermined overhead rate
Williams-
Overhead costs = 220 * $47 = $10,340
Chandler-
Overhead costs = 100 * $47 = $4,700
Nguyen-
Overhead costs = 140 * $47 = $6,580
2. Cost of goods manufactured for Williams = Direct materials + Direct labor + (Overhead cost * (Designers hours for Williams/ Total designer hours))
= $5,000 + $2,600 + ($18,000 * 220 / 460)
= $5,000 + $2,600 + $8,609 = $16,209
Cost of goods manufactured for Chandler = Direct materials + Direct labor + (Overhead cost * (Designers hours for Chandler/ Total designer hours))
= $2,000 + $1,200 + ($18,000 * 100 / 460)
= $2,000 + $1,200 + $3,913 = $7,113
Cost of goods manufactured for Nguyen = Direct materials + Direct labor + (Overhead cost * (Designers hours for Nguyen/ Total designer hours))
= $3,800 + $1,700 + ($18,000 * 140 / 460)
= $3,800 + $1,700 + $5,478= $10,978
Cost of goods manufatured = $16,209 + $7,113 + $10,978 = $34,300
3. Accumulated cost of work in process = Direct materials + Direct labor + (Overhead cost * (Designers hours for Nguyen/ Total designer hours))
= $3,800 + $1,700 + ($18,000 * 140 / 460)
= $3,800 + $1,700 + $5,478= $10,978
4. Total absorbed overhead = $10,340 + $4,700 + $6,580 = $21,620
Actual overhead = $18,000
Overhead applied = $21,620 - $18,000 = $3,620