Red Fire Inc. produces fire trucks. The company uses a normal job-order costing system to calculate its cost of goods manufactured. The company's policy is to price its job at cost plus 30% markup. On January 1, 2016, there was only one job in process, with the following costs:

__________________________Job 200

Direct materials .................. $13,500

Direct labour ........................ 18,000

Applied overhead .................. 27,000

Total ................................ $58,500

The following balances were taken from the general ledger of the company as of January 1, 2016:

Direct materials inventory ........................................ $45,000

Finished goods inventory (for Job 100) ........................ $85,000

During the year 2016, the following events occurred:

Direct materials were purchased on account for $375,000.

Two more jobs were started: Job 300 and Job 400. Direct materials and direct labour costs incurred by each job in process during the year 2016 were as follows:

The company incurred the following actual factory overhead during the year:
Factory rent ......................... $135,000
Factory supplies ..................... $ 55,500
Indirect labour ...................... $ 85,750
Jobs 200 and 300 were completed.
Jobs 100 and 200 were sold.
Instructions
(a) Calculate the total applied overhead for the year 2016. The factory overhead costs are applied to each job on the basis of direct labour dollars.
(b) Prepare simple job-order cost sheets for jobs 200, 300, and 400 for the year ended December 31, 2016.
(c) Determine whether the overhead is over-applied or under-applied. By how much?
(d) Prepare a schedule of cost of goods sold, identifying both normal and adjusted cost of goods sold, for the year ended December 31, 2016.
(e) Calculate the selling price of Job 200.
(f) Calculate the ending balances as of December 31, 2016, for the following accounts: Direct Materials and Work in Process.

Transcribed Image Text:

ob 200 Job 300 Job 400 Direct materials $150,000 $45,000 35,000 Direct labour $130,000S4 5,000 $25,000