Old World Clocks, Inc., which uses a job-costing system, began business on January 1, 2018 and applies
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Question:
Old World Clocks, Inc., which uses a job-costing system, began business on January 1, 2018 and applies manufacturing overhead on the basis of direct-labor cost. The following information relates to 2020:
- Budgeted direct labor and manufacturing overhead were anticipated to be $660,000 and $825,000 respectively.
- Job no. 1 was started in 2019 and had $37,000 of cost in work in process as of 12/31/19. Jobs 2 and 3 were begun during the year and had the following charges for direct material and direct labor:
Job No. | Direct Materials | Direct Labor | |||||
1 | $ | 148,000 | $ | 55,000 | |||
2 | 234,000 | 64,000 | |||||
3 | 86,000 | 98,000 | |||||
- Job nos. 1 and 2 were completed and sold on account to customers at full product cost plus 140%. Job no. 3 remained in production.
- Actual manufacturing overhead by year-end totaled $280,000.
Required: A.Compute the company's predetermined overhead application rate. 4 points
B. What is the full product cost of Jobs 1 and 2? 12 points C.Compute Old World Clock's ending work-in-process inventory. 6 points D.Determine Old World Clock's gross margin. 4 points E.Was manufacturing overhead under- or overapplied during 2020? By how much? 3 points
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