Sassafras Yacht Corporation began operations on December 1, 2016.The company uses normal costing as part of a job-order cost system.During December, the company purchased $95,000 of direct material, and then used $50,000 of these direct materials to start Job 450.The company charged total conversion costs of $56,000 (direct labor and overhead) to Job 450 during December.As of the end of December Job 450 was not complete.There was no underapplied or overapplied overhead for December.
+ Sassafras 'r'acht Corporation began operations on December 1, 2015. The company uses normal costing as part of a job-order cost system. During December, the company purchased $95,000 of direct material, and then used $50,000 of these direct materials to start Job 450. The company charged total conversion costs of $56,000 [direct labor and overhead] to Job 450 during December. As of the end of December Job 450 was not complete. There was no underapplied or overapplied overhead for December. + + The company charges overhead to jobs using direct labor HDURS {careful!]. The estimated direct labor hours for 2012 are 40,000 hours and the estimated overhead cost for 2012 is $800,000. During 2012, the following tlansactions occurred.+ + 1. There were 5 jobs that had work completed on them in 2012. Some of the data for these jobs are shown below:+ Job 450 Job 500 Job 550 Job 600 Job 650+ Direct Material Cost $5,500 $25,000 $45,000 $15,000 $2,000+ Direct Labor Hours 5,000 hrs. 10,000 hrs. 15,000 hrs. 2,500 hrs 2,500 hrs+ The Direct Labor Rate for 2012 is $30 per hour.+ The company purchased $280,000 of direct materials. + At the end of 2012, the jobs that were not finished were Jobs 600 and E150. Job 450 consisted of 5,000 units of which 4,500 were sold in 2012r at a selling price of $250 each. Job 550 consisted of 15,000 units of which 4,000 were sold in 2012 at a selling price of $200 each. Job 500 consisted of 10,000 uniE, none of which were sold at the end of 2012.+ 5. Dther costs incurred during 2012 include the following:+ FPP+ Advertising Expense $225,000 Indirect Labor $450,000+ Maintenance- Factory $ 25,000 Factory Insurance $ 45,000+ Administlative Expense $450,000 Corporate General Expenses $125,000+ Depreciation- Factory $125,000 F.G. Warehouse Depreciation $ 40,000+ Utilities- Factory $185,000 Miscellaneous Overhead $ 20,400+ . ...... Fakssaaaa ............ $259951.........."Jr-HiresHars'ja.s..................1.1.P:EJE'!:.... Your Task:+ A. Prepare, in good form, a Schedule of Cost of Goods Manufactured for 2011+ B. Add up the total cosE of Jobs A, B and C. Does this total equal your Cost of Goods Manufactured from Part A? Should it?+ C. Compute the undelapplied or overapplied overhead for 2012. Is it under or overapplied2+ 0 Assume that any underapplied or overapplied overhead is closed totally to Cost of Goods Sold at the end of 2012. Prepare, in good form, an Income Statement for 2012.+ E. Now assume that we want to allocate the underapplied or overapplied overhead to the appropriate accounts at the end of 2012. Remember you must determine howr much applied overhead is in 1I.I'I.I'IF' and Finished Goods ending inventories as well as Cost of Goods sold. Assume Finished Goods Inventory has $430,000 of applied overhead in its ending balance, and you know how much applied overhead is on Jobs 600 and (:50. You should be able to determine howr much applied overhead will be in Cost of Goods sold at the end of 2012. Allocate the underiover} applied overhead and show how much should be closed to each account.+ F. If you prorate the under[over] applied overhead rather than charging it totally to Cost of Goods Sold, would Net 0perating Income for the company increase or decrease? By how much? One way to figure this out would be to just look at the change in the adjustment to Cost of Goods Sold .+
