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, 2022, there was only one job in process, with the following costs:

The following balances were taken from the company’s general ledger as at January 1, 2022: 

During the year 2022, 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 2022 were as follows:

The company incurred the following actual factory overhead during the year: 

Jobs 200 and 300 were completed. 

Jobs 100 and 200 were sold.

Instructions 

a. Calculate the total applied overhead for the year 2022. The factory overhead costs are applied to each job on the basis of direct labour dollars.

b. Prepare simple job cost sheets for jobs 200, 300, and 400 for the year ended December 31, 2022.

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, 2022. 

e. Calculate the selling price of Job 200. 

f. Calculate the ending balances as at December 31, 2022, for the following accounts: Direct Materials and Work in Process Inventory.

Transcribed Image Text:

Direct materials Direct labour Applied overhead Total Job 200 $13,500 18,000 27,000 $58,500