Module 1

Graded Assignment

In December 2019, West Corporations manager estimated next years total direct labor cost assuming 10 persons working an average of 2,000 hours each at an average wage rate of $20 per hour. The manager also estimated the following manufacturing overhead costs for 2020.

Indirect labor	$ 75,000
Factory supervision	100,000
Rent on factory building	50,000
Factory utilities	100,000
Factory insurance	10,000
Depreciation factory equipment	500,000
Repairs expense factory equipment	50,000
Factory supplies used	20,000
Miscellaneous production costs	5,000
Total estimated overhead costs	$910,000

At the end of 2020, records show that the company incurred $850,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 100, $100,000; Job 101, $80,000; Job 102, $50,000; Job 103, $120,000; Job 104, $40,000. In addition, Job 105 is in process at the end of 2020 and had been charged $25,000 of direct labor. Direct material costs for each of the jobs were as follows: Job 100, $63,000; Job 101, 42,000; Job 102 35,000; Job 103, 78,000; Job 104 39,000; Job 105, 45,000. No jobs were in the process at the beginning of 2020. The companys predetermined overhead rate is based on direct labor cost.

Required

1. Determine the predetermined overhead rate for 2020.
2. Determine the overhead cost applied to each of the six jobs during 2020.
3. Determine the total cost of each of the six jobs at the end of 2020.
4. Determine the dollar amount that would be transferred from work in process inventory to finished goods inventory and ultimately to cost of goods sold in 2020.
5. Determine the dollar amount that would remain in work in process inventory at the end of 2020.
6. Determine the over- or under-applied overhead at the end of 2020 and indicate whether it was over- or under-applied.
7. How would you recommend closing out the over- or under-applied overhead?