The following information is available for Lock-Safe Company, which produces special-order security products and uses a job order cost accounting system.

The following information is available for Lock-Safe Company, which produces special-order security products and uses a job order cost accounting system.

 

	April 30		May 31
Inventories
Raw materials	$	34,000	$	51,000
Goods in process		9,500		20,700
Finished goods		67,000		33,600
Activities and information for May
Raw materials purchases (paid with cash)				172,000
Factory payroll (paid with cash)				210,000
Factory overhead
Indirect materials				10,000
Indirect labor				74,000
Other overhead costs				99,000
Sales (received in cash)				1,100,000
Predetermined overhead rate based on direct labor cost				55	%

 

Compute the following amounts for the month of May using T-accounts.

 

1.	Cost of direct materials used.
2.	Cost of direct labor used.
3.	Cost of goods manufactured.
4.	Cost of goods sold.*
5.	Gross profit.
6.	Overapplied or underapplied overhead.

 

*Do not consider any underapplied or overapplied overhead. Explanation:            1.  Cost of direct materials used             Beginning raw materials inventory $ 34,000         Plus purchases   172,000             Raw materials available   206,000         Less ending raw materials inventory   (51,000 )           Total raw materials used   155,000         Less indirect materials used   (10,000 )           Cost of direct materials used $ 145,000                  2.  Cost of direct labor used             Total factory payroll $ 210,000         Less indirect labor   (74,000 )           Cost of direct labor used $ 136,000                  3.  Cost of goods manufactured             Beginning goods in process inventory $ 9,500         Plus direct materials   145,000         Plus direct labor   136,000         Plus overhead applied (55%)   74,800             Total cost of goods in process   365,300         Less ending goods in process inventory   (20,700 )           Cost of goods manufactured $ 344,600                  4.  Cost of goods sold             Beginning finished goods inventory $ 67,000         Plus: Cost of goods manufactured   344,600         Less ending finished goods inventory   (33,600 )           Cost of goods sold $ 378,000                  5.  Gross profit             Sales $ 1,100,000         Cost of goods sold   (378,000 )           Gross profit $ 722,000                  6.  Overapplied or underapplied overhead             Indirect materials $ 10,000         Indirect labor   74,000         Other overhead costs   99,000             Total actual overhead incurred   183,000         Overhead applied   74,800            Underapplied overhead $ 108,200

In December 2012, Shire Computer’s management establishes the year 2013 predetermined overhead rate based on direct labor cost.

In December 2012, Shire Computer’s management establishes the year 2013 predetermined overhead rate based on direct labor cost. The information used in setting this rate includes estimates that the company will incur $826,800 of overhead costs and $520,000 of direct labor cost in year 2013. During March 2013, Shire began and completed Job No. 13-56.

1.

What is the predetermined overhead rate for year 2013? 2. Use the information on the following job cost sheet. (Round your answer to the nearest dollar amount.) JOB COST SHEET   Customer’s Name   Keiser Co. Job No. 13-56           Job Description   5 plasma monitors—61 inch           Direct Materials   Direct Labor   Overhead Costs Applied             Date Requisition No. Amount   Time-Ticket No. Amount   Rate Amount     Mar. 8 4-129 $ 4,000     T-306 $ 620             Mar. 11 4-142   6,900     T-432   1,290             Mar. 18 4-167   3,500     T-456   1,280                           Totals                                       Determine the total cost of the job. Total cost of the job $22,662

Explanation:

2.

Direct materials	$	14,400
Direct labor		3,190
Overhead ($3,190 × 159%)		5,072
Total cost of Job No. 13-56	$	22,662

As of the end of June, the job cost sheets at Racing Wheels, Inc., show the following total costs accumulated on three custom jobs.

As of the end of June, the job cost sheets at Racing Wheels, Inc., show the following total costs accumulated on three custom jobs.

 

	Job 102	Job 103	Job 104
Direct materials	$ 26,000	$ 73,000	$ 55,000
Direct labor	12,000	27,200	41,000
Overhead	5,160	11,696	17,630

 

Job 102 was started in production in May and the following costs were assigned to it in May: direct materials, $14,000; direct labor, $2,900; and overhead, $1,247. Jobs 103 and 104 are started in June. Overhead cost is applied with a predetermined rate based on direct labor cost. Jobs 102 and 103 are finished in June, and Job 104 is expected to be finished in July. No raw materials are used indirectly in June. Using this information, answer the following questions. (Assume this company’s predetermined overhead rate did not change across these months).

 

1&2.

Complete the given below table to calculate the cost of the raw materials requisitioned and direct labor cost incurred during June for each of the three jobs? Explanation: 1. The cost of direct materials requisitioned in the month equals the total direct materials costs accumulated on the three jobs less the amount of direct materials cost assigned to Job 102 in May:             Job 102 $ 26,000           Less prior costs   (14,000 ) $ 12,000              Job 103         73,000      Job 104         55,000                Total materials used (requisitioned)       $ 140,000                  2. Direct labor cost incurred in the month equals the total direct labor costs accumulated on the three jobs less the amount of direct labor cost assigned to Job 102 in May:                     Job 102 $ 12,000           Less prior costs   (2,900 ) $ 9,100             Job 103         27,200     Job 104         41,000               Total direct labor       $ 77,300                3. The predetermined overhead rate equals the ratio of the amount of overhead assigned to jobs divided by the amount of direct labor cost assigned to them. Since the same rate is used for all jobs started and completed within a month, the ratio for any one job equals the rate that was applied. This table shows the ratio for jobs 102 and 104:        Job 102   Job 104     Overhead $ 5,160   $ 17,630     Direct labor   12,000     41,000     Ratio   43 %   43 %