GOALS AND OBJECTIVES

$$ To review the nature and usage of job$-$order or job costing as a system for accumulation.

$$ To review how normal costing for overhead is used as a part of job costing.

$$ To review how job costing applies to both financial reporting and internal planning, controlling and decision making.

$2-1$

CALIFORNIA COMPANY

$....$ Uses job order costing. At the start of the year, January $1,$ the company had work$-$in$-$process which consisted of the following jobs and costs:

Job $1$ Job $2$ Job $3$

Direct materials $ $1,600$ $ $2,000$ $ $850$

Direct labor $1,9001,200900$

Applied overhead $1,7101,080810$

During the first quarter $3$ more jobs were started $$ Job $4,$ Job $5$ and Job $6.$ The following cost information is available for costs incurred during the month of January:

Job $1$ Job $2$ Job $3$ Job $4$ Job $5$ Job $6$

Direct materials $1,8001,7356,5504,5001,300600$

Direct labor $1,0001,4004,2001,800800860$

During the quarter, jobs $1,3,4$ and $6$ were all completed. In addition, Jobs $3$ and $6$ were sold before the end of the quarter.

The company uses normal costing and closes under$-$ and over$-$applied overhead directly to Cost of Goods Sold. There was no finished$-$goods inventory at the start of the period. Selling and administrative expenses totaled $$3,986$ for the quarter. Actual overhead for the quarter totaled $$19,000.$ The company had no other non$-$operating gains or losses. Assume a tax rate of $35\%.$

Required:

$1.$ The company applies overhead based on direct labor cost $$ compute the predetermined overhead rate.

POHR $=$ Applied Overhed $3,600$

Direct Labor Cost $4,000$

$=0\mathrm{.}900$r $90\%$

$2.$ WHY would the company use normal costing versus actual costing?

$-$ Using a predetermined overhead rate based on estimations, normal costing enables businesses to consistently apply overhead to jobs all year long. It facilitates the prompt provision of job cost information, evens out seasonal variations in overhead expenses, and makes budgeting and planning simpler. While Real overhead rates are used in actual costing, which makes it challenging to price works and make timely judgments because they can change and may not be known until the end of the period.

$3.$ Set up summary work in process T$-$accounts and job cost sheets for each job for the first quarter.

$-$

$4.$ Post all first quarter costs to the summary work in process AND individual job cost sheets. When posting, make sure you do a total column for each cost element and ONLY POST TOTALS to the general ledger T accounts.

$5.$ Calculate the ending balance for each job as of March $31.$

$6.$ Calculate the ending balance in work$-$in process as of March $31.$

$7.$ Calculate the cost of goods manufactured for the quarter.

$8.$ Calculate the normal $($unadjusted$)$ cost of goods sold for the quarter. Calculate the adjusted cost of goods sold. WHY are they different? Why do we need both? What is the reason for the normal cost of goods sold?

$9.$ During the quarter, did finished goods inventory increase or decrease AND by how much? WHY?

$10.$ Compute the over$/$underapplied overhead for the quarter.

$11.$ Assuming that the company prices its jobs at full cost plus $50\%,$ calculate the sales revenue for the quarter.

$12.$ Prepare an income statement for the first quarter.

Please answer from $1-12$ and shows the work please, thank you.