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Exercise & Solution4.5

The document presents a job costing exercise for Sanger Company, detailing costs incurred for specific jobs in Department 203 for 2005. It includes calculations for underallocated overhead, cost of goods sold, and work-in-process inventory, concluding with the amount of underallocated overhead to be debited to Work-in-Process Control. The exercise illustrates the application of budgeted overhead rates and actual costs to determine financial outcomes for the year.

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Kadri Ahmad
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38 views2 pages

Exercise & Solution4.5

The document presents a job costing exercise for Sanger Company, detailing costs incurred for specific jobs in Department 203 for 2005. It includes calculations for underallocated overhead, cost of goods sold, and work-in-process inventory, concluding with the amount of underallocated overhead to be debited to Work-in-Process Control. The exercise illustrates the application of budgeted overhead rates and actual costs to determine financial outcomes for the year.

Uploaded by

Kadri Ahmad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd

Chapter 4

Job costing

Exercise 4.5
Sanger Company provides the following information:
Department 203 Costs Incurred for 2005
Identified With
Specific Jobs Materials Labor Other Total
Job 1376 $ 1,000 $7,000 $8,000
Job 1377 26,000 53,000 79,000
Job 1378 12,000 9,000 21,000
Job 1379 4,000 1,000 5,000
Not Identified With
Specific Jobs
Indirect materials and
supplies 15,000 15,000
Indirect manufacturing labor 53,000 53,000
Employee fringe benefits 23,000 23,000
Depreciation 12,000 12,000
Supervision 20,000 20,000
Total 58,000 143,000 35,000 236,000

Department 203 Budgeted Overhead Rate for 2005


Budgeted overhead:
Variable
Indirect materials and supplies $16,000
Indirect manufacturing labor 56,000
Employee fringe benefits 24,000
Fixed
Depreciation 12,000
Supervision 20,000
Total $128,000

Budgeted direct manufacturing labor costs $80,000


Budgeted manufacturing overhead rate
$128,000 / $80,000 160%

Department 203 Work in Process at Beginning of 2005


Job. No. Direct Materials Direct Labor Overhead Total
1376 $17,500 $22,000 $33,000 $72,500

Assume Job 1376 was the only job completed during 2005. It was sold upon completion.
a. Compute underallocated or overallocated overhead for Department 203 for 2005.
b. Compute cost of goods sold for 2005.
c. Compute the cost of work-in-process inventory at the end of 2005.
d. Ignoring your answer in part (a), assume overhead is underallocated by $14,000 in Department 203. If
under-allocated overhead is prorated to Cost of Goods Sold and applicable inventories based on 2005's
amount of allocated overhead (before proration) in the ending balances of these accounts, compute the
amount of underallocated overhead that should be debited to Work-in-Process Control at year-end.
Chapter 4
Job costing

Solution 4.5

a. Actual overhead for 2005:


Indirect materials and supplies $15,000
Indirect manufacturing labor 53,000
Employee fringe benefits 23,000
Depreciation 12,000
Supervision 20,000
Total 123 000
Actual direct manufacturing labor costs for 2005:
Job 1376 $ 7,000
Job 1377 53,000
Job 1378 9,000
Job 1379 1,000
Total 70 000
Actual overhead incurred 123,000
Overhead allocated, $70,000 X160% 112,000
Under-allocated overhead 11,000

b. In this case, cost of goods sold is equal to the cost of Job 1376.
Cost of goods sold = $72,500 + $1,000 + $7,000 + ($7,000 x 160%) = $91,700

Note that, for use in answer (d) below, overhead allocated to cost of goods sold during
2005 = $7,000 x 160% = $11,200.

c. Job 1377 Job 1378 Job 1379 Total


Direct materials $ 26,000 $12,000 $4,000 $ 42,000
Direct manufacturing labor 53,000 9,000 1,000 63,000
Overhead allocated
(Direct manuf. labor costs x 160%) 84,800 14,400 1,600 100,800
Work in process at year-end $163,800 35 400 6 600 205 800
d. Overhead allocated during 2005:
Portion to cost of goods sold (from answer b) $ 11,200
Portion to work in process (from answer c) 100.800
Total overhead allocated 112 000

Let X = Underallocated overhead debited to ending Work-in-Process Control


X = ($100,800 - $112,000) x $14,000
X = 0.90 x $14,000 = $12,600

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