Job Costs Using a Plantwide Overhead Rate

Naranjo Company designs industrial prototypes for outside companies. Budgeted overhead for the year was $420,000, and budgeted direct labor hours were 24,000. The average wage rate for direct labor is expected to be $35 per hour. During June, Naranjo Company worked on four jobs. Data relating to these four jobs follow:

	Job 39	Job 40	Job 41	Job 42
Beginning balance	$23,900	$35,700	$15,000	$1,000
Materials requisitioned	17,300	23,200	10,800	13,100
Direct labor cost	8,400	20,300	5,450	4,000

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. (Naranjo had originally developed Job 40 to order for a customer; however, that customer was near bankruptcy and the chance of Naranjo being paid was growing dimmer. Naranjo 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:

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1. Calculate the overhead rate based on direct labor cost.

fill in the blank 5497e009aff1010_1 % of direct labor cost

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2. Set up a simple job-order cost sheet for all jobs in process during June.

	Job 39	Job 40	Job 41	Job 42
Balance, June 1	$fill in the blank e996d6fd904ffe6_1	$fill in the blank e996d6fd904ffe6_2	$fill in the blank e996d6fd904ffe6_3	$fill in the blank e996d6fd904ffe6_4
Beginning balance, Work-In-ProcessCost of goods soldDirect materialsEnding balance, Work-in-ProcessMaterials handling	- Select -	- Select -	- Select -	- Select -
Beginning balance, Work-In-ProcessCost of goods soldDirect laborEnding balance, Work-in-ProcessMaterials handling	- Select -	- Select -	- Select -	- Select -
Applied overheadBeginning balance, Work-In-ProcessCost of goods soldEnding balance, Work-in-ProcessMaterials handling	- Select -	- Select -	- Select -	- Select -
Total	$fill in the blank e996d6fd904ffe6_20	$fill in the blank e996d6fd904ffe6_21	$fill in the blank e996d6fd904ffe6_22	$fill in the blank e996d6fd904ffe6_23

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3. What if the expected direct labor rate at the beginning of the year was $28 instead of $35? What would the overhead rate be? If required, round your overhead rate answer to one decimal place.

New budgeted direct labor cost = $fill in the blank 946b24fee00b00b_1

New overhead rate = fill in the blank 946b24fee00b00b_2% of direct labor cost

How would the cost of the jobs be affected?