Need help with J Southworth Company uses a job-order costing system and applies
ID: 2372460 • Letter: N
Question
Need help with J
Southworth Company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of direct materials used in production. Its predetermined overhead rate was based on a cost formula that estimated $222,600 of manufacturing overhead for an estimated allocation base of $159,000 direct material dollars.
The following transactions took place during the year (all purchases and services were acquired on account):
Depreciation recorded for the year, $48,000 (70% relates to factory assets, and the remainder relates to selling and administrative assets).
Rental cost incurred on buildings, $87,000 (70% of the space is occupied by the factory, and 30% is occupied by sales and administration).
Cost of goods manufactured for the year, $558,000.
Sales for the year (all on account) totaled $1,300,000. These goods cost $530,000 according to their job cost sheets.
The balances in the inventory accounts at the beginning of the year were as follows:
34,000
The following transactions took place during the year (all purchases and services were acquired on account):
Explanation / Answer
Hi,
Please find the answer as below:
Calculation for J:
Predetermined Overhead Rate = Manufacturing Overhead Cost Applied/Amount of Allocation Base = 222600/159000*100 = 140%
Overhead Applied = Direct Material Cost*Predetermined Overhead Rate = 142000*140% = 198800.
Thanks.