Question
Mastery Problem: Job Order Costing Purl of Great Price Company Maria Young is the sole stockholder of Purl of Great Price Company (POGP Company), which
Mastery Problem: Job Order Costing
Purl of Great Price Company
Maria Young is the sole stockholder of Purl of Great Price Company (POGP Company), which produces high-end knitted sweaters and sweater vests for sale to retail outlets. The company started in January of the current year, and employs three knitters (each of whom work 40 hours per week) and one office manager/knitting supervisor (this employee works 20 hours per week as office manager, and 20 hours per week as knitting supervisor). All wages are paid in cash at the end of each month.
Each knitter has a knitting machine that is used about 2/3 of the knitters time, the rest of the knitters time being involved in hand knitting and piecing together the garments. The company also has a packaging machine used to wrap the garments in plastic for shipping, which is operated by the office manager/knitting supervisor approximately 5 hours per week.
The knitting machines were purchased on January 1 of the current year, and cost $2,400 each, with an anticipated useful life of 10 years and no salvage value. The packaging machine was purchased on the same date and cost $4,800, with the same anticipated useful life and salvage value.
Nov. 30 Trial Balance
POGP Company Trial Balance November 30, 20Y8 | ||
Account Title | Debit | Credit |
Cash | 20,000 | |
Accounts Receivable | 1,000 | |
Supplies | 200 | |
Materials | 5,000 | |
Work in Process | 5,404 | |
Equipment | 12,000 | |
Accumulated Depreciation-Equipment | 825 | |
Accounts Payable | 150 | |
Common Stock | 10,000 | |
Retained Earnings | 12,000 | |
Dividends | 18,096 | |
Sales | 307,500 | |
Cost of Goods Sold | 255,040 | |
Factory Overhead | 15 | |
Wages Expense | 13,750 | |
330,490 | 330,490 |
Predetermined Factory Overhead Rate
Since the company is more reliant on labor than machines, Maria decides to use direct labor hours (DLH) as the activity base for her predetermined factory overhead rate, rather than machine hours (MH).
Estimated Selected Amounts for the Year | |
Estimated depreciation on equipment | $1,200 |
Estimated total Office Manager/Knitting Supervisor wages | $42,000 |
Estimated office utilities | $5,000 |
Estimated factory utilities | $4,800 |
Estimated factory rent | $18,000 |
Activity Base Data | |
Estimated number of DLH for the year | 5,000 |
Estimated number of MH for the year | 3,500 |
I need help with computing the predetermined factory overhead rate for the current year
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