Question
Reed Incorporated uses a job-order costing system and a predetermined overhead rate based on machine hours. At the beginning of the year, the company estimated
Reed Incorporated uses a job-order costing system and a predetermined overhead rate based on machine hours. At the beginning of the year, the company estimated manufacturing overhead for the year would be $240,000 and machine hours would be 8,000. The following information pertains to December of the current year:
| Job 10 | Job 11 | Job 12 | Total | |
| Work-in-process, Dec. 1 | $16,000 | $26,000 | $38,000 | $80,000 |
December production activity:
| Materials requisitioned | $ 4,000 | $ 4,800 | $ 7,200 | $16,000 | |
| Direct labor cost | $ 2,400 | $ 3,600 | $ 4,000 | $10,000 | |
| Machine hours | 400 | 700 | 900 | 2,000 | |
| Labor hours | 120 | 180 | 200 | 500 | |
Actual manufacturing overhead cost incurred in December was $61,000. Required:
| A. | Compute the predetermined overhead application rate. |
| B. | Determine the total cost associated with each job. |
| C. | If Jobs 10 and 12 were completed, prepare the journal entry to move the cost. |
| D. | If Job 10 was delivered to customers that paid $50,000 cash, prepare the journal entries. |
| E. | What is the gross margin for Job 10? |
| F. | What is the cost assigned to ending work in process? |
| G. | Assuming no beginning finished goods what is the cost assigned to ending finished goods? |
| H. | How much was overhead over/underapplied? |
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Management Accounting Information for Decision-Making and Strategy Execution
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young
6th Edition
