Divine Bath Works is a leader in the bath fixtures industry, rising to prominenc
ID: 2604601 • Letter: D
Question
Divine Bath Works is a leader in the bath fixtures industry, rising to prominence with the introduction of over-the-counter sinks. The following data pertain to September, the last month of Divine's fiscal year. Type of Inventory Balance as of Septeniber Materials (direct and indirect) Work in Process Finished Goods $28,100 $124,320 $245,000 The Work in Process Inventory on 9/1 consisted of one job, Job X, for 700 units of Model OO, an oval, over-the-counter sink. The Finished Goods Inventory on 9/1 comprised the following: Cost per unit Total Cost Model Number (description) 00 (Oval, over-the counter) RI (Round, in-the counter) OI (Oval, in-the counter) Quantity 100 400 450 $32,000 $78,900 $134,100 1815-251$245,000 $320.00 $197.25 $298.00 Total 95o 970 Divine uses a "normal" costing system, combined with the FIFO inventory flow assumption, to cost its inventories. That is, Divine traces actual materials and labor costs to individual jobs. It allocates manufacturing overhead using a predetermined overhead rate computed at the start of the year. Divine allocates overhead using direct lahor hours as the allocation basis (cost driver).
Explanation / Answer
1.
Over applied overheads:
For September = $14,983
For the year = $27,148
2.
Balance of work in process as at September 30 :$44,405.00
Working:
3.
Working:
4.
Workings: Upto September For the August Year Predetermined overhead rate * A 21 21 21 Actual direct labor hours ** B 75315 6873 82188 Overheads applied (A X B) C 1581615 144333 1725948 Actual overheads incured *** D 1569450 129350 1698800 Over / (Under) applied overhead (C - D) E 12165 14983 27148 Predetermined overhead rate * Budgeted overhads for the year A 1688400 Budgeted direct labor hours for the year B 80400 Predetermined overhead rate (A / B) C 21 For September (i) Direct labor hours * Job X 1920 Job K 2430 Job L 1678 Job B 845 Total 6873 (ii) Actual overheads incurred * Indirect material 22000 Indirect labor 32000 Supervision 18400 Depreciation 32650 Utilities 8900 Factory rent 15400 Total 129350