Oliphant Company designs industrial prototypes for outside companies. Budgeted overhead for the year was $476,000, and budgeted direct labor hours were 13,600. The average wage rate for direct labor is expected to be $25 per hour. During June, Oliphant Company worked on four jobs. Data relating to these four jobs follow:

Overhead is assigned as a percentage of direct labor cost. During June, Jobs 39 and 40 were completed; Job 39 was sold at 120 percent of cost. (Oliphant had originally developed Job 40 to order for a customer; however, that customer was near bankruptcy and the chance of Oliphant being paid was growing dimmer. Oliphant decided to hold Job 40 in inventory while the customer worked out its financial difficulties. Job 40 is the only job in Finished Goods Inventory.) Jobs 41 and 42 remain unfinished at the end of the month.
Required:
1. Calculate the overhead rate based on direct labor cost.
2. Set upasimple job-order cost sheet for all jobs in process during June.
3. What if the expected direct labor rate at the beginning of the year was $20 instead of $25? What would the overhead rate be? How would the cost of the jobs be affected?
CornerstoneLO1

Transcribed Image Text:

Job 39 Job 40 Job 41 Job 42 Beginning balance $34,500 $23,780 $15,000 $ 0 Materials requisitioned 26,000 13,700 8,350 11,000 Direct labor cost 10,000 18,500 3,000 2,900