Job Costs Using a Plantwide Overhead Rate

Naranjo Company designs industrial prototypes for outside companies. Budgeted overhead for the year was $367,500, and budgeted direct labor hours were 21,000. 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	$25,400	$33,600	$19,800	$1,500
Materials requisitioned	21,100	22,600	13,100	14,000
Direct labor cost	12,200	19,700	7,750	4,900

Overhead is assigned as a percentage of direct labor cost. During June, Jobs 39 and 40 were completed; Job 39 was sold at 110 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:

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

fill in the blank 35d3dd06604ffe9_1 % of direct labor cost

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Budgeted direct labor cost = average wage rate for direct labor x budgeted direct labor hours

Overhead rate = budgeted overhead costs budgeted direct labor cost

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

Naranjo Company
Job-Order Cost Sheets
	Job 39	Job 40	Job 41	Job 42
Balance, June 1	$fill in the blank 5d2ab1fb6fcd050_1	$fill in the blank 5d2ab1fb6fcd050_2	$fill in the blank 5d2ab1fb6fcd050_3	$fill in the blank 5d2ab1fb6fcd050_4
Direct materials	fill in the blank 5d2ab1fb6fcd050_6	fill in the blank 5d2ab1fb6fcd050_7	fill in the blank 5d2ab1fb6fcd050_8	fill in the blank 5d2ab1fb6fcd050_9
Direct labor	fill in the blank 5d2ab1fb6fcd050_11	fill in the blank 5d2ab1fb6fcd050_12	fill in the blank 5d2ab1fb6fcd050_13	fill in the blank 5d2ab1fb6fcd050_14
Applied overhead	fill in the blank 5d2ab1fb6fcd050_16	fill in the blank 5d2ab1fb6fcd050_17	fill in the blank 5d2ab1fb6fcd050_18	fill in the blank 5d2ab1fb6fcd050_19
Total	$fill in the blank 5d2ab1fb6fcd050_20	$fill in the blank 5d2ab1fb6fcd050_21	$fill in the blank 5d2ab1fb6fcd050_22	$fill in the blank 5d2ab1fb6fcd050_23

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See Cornerstone 5.1.

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 a3e2b501c01ffee_1

New overhead rate = fill in the blank a3e2b501c01ffee_2% of direct labor cost

How would the cost of the jobs be affected?