Script Company uses a job costing accounting system for its production costs. A predetermined overhead rate based on direct labor-hours is used to apply overhead to individual jobs. An estimate of overhead costs at different volumes was prepared for the current year as follows:

The expected volume is 24,000 direct labor-hours for the entire year. The following information
is for October, when jobs 1011 and 1015 were completed:
Inventories, October 1
Raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . $ 100,800
Work in process (Job 1011) . . . . . . . . . . . . . . . . . . . . . . . . . 219,120
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 546,960
Purchases of raw materials and supplies
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,509,600
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,320
Materials and supplies requisitioned for production
Job 1011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 674,400
Job 1015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 562,800
Job 1017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,280
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184,080
$1,534,560
Machine-hours (MH)
Job 1011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,440 MH
Job 1015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,320 MH
Job 1017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,440 MH
Direct labor-hours (DLH)
Job 1011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,400 DLH
Job 1015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,660 DLH
Job 1017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,220 DLH
Labor costs
Direct labor wages (all hours @ $48) . . . . . . . . . . . . . . . . . $685,440
Indirect labor wages (12,000 hours) . . . . . . . . . . . . . . . . . . 151,200
Supervisory salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307,200
Building occupancy costs (heat, light, depreciation, etc.)
Factory facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,560
Sales and administrative offices . . . . . . . . . . . . . . . . . . . . . 34,080
Factory equipment costs
Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,320
Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . 19,680
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,760
$ 95,760
Required
Answer the following questions:
a. Compute the predetermined overhead rate (combined fixed and variable) to be used to apply overhead to individual jobs during the year.
b. Compute the total cost of Job 1011 when it is finished.
c. How much of factory overhead cost was applied to Job 1017 during October?
d. What total amount of overhead was applied to jobs during October?
e. Compute actual factory overhead incurred during October.
f. At the end of the year, Script Company had the following account balances:
Balance
Under applied Overhead . . . . . . . . . . $ 7,200,000
Cost of Goods Sold . . . . . . . . . . . . . 67,200,000
Work-in-Process Inventory . . . . . . . . 9,600,000
Finished Goods Inventory . . . . . . . . 19,200,000
How would you recommend treating the under applied overhead? Show the effect on the account balances in the following table:
Under applied Overhead. . . . . . . . . . _________
Cost of Goods Sold. . . . . . . . . . . . . _________
Work-in-Process Inventory. . . . . . . . _________
Finished Goods Inventory . . . . . . . . _________

Transcribed Image Text:

Direct labor-hours. 18,000 24,000 0,000 Variable overhead costs.. $ 864,000 $1,152,000 $1,440,000 200,000 .200,000 1.200,000 Fixed overhead costs ...1