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On April 1, Sangvikar Company had the following balances in its inventory accounts

Predetermined Overhead Rate, Application of Overhead to Jobs, Job Cost

On April 1, Sangvikar Company had the following balances in its inventory accounts:

Materials Inventory$12,730
Work-in-Process Inventory21,340
Finished Goods Inventory8,700

Work-in-process inventory is made up of three jobs with the following costs:

Job 114Job 115Job 116
Direct materials$2,411$2,640$3,650
Direct labor1,8001,5604,300
Applied overhead1,1701,0142,795

During April, Sangvikar experienced the transactions listed below.

  1. Materials purchased on account, $29,000.
  2. Materials requisitioned: Job 114, $16,500; Job 115, $12,200; and Job 116, $5,000.
  3. Job tickets were collected and summarized: Job 114, 150 hours at $12 per hour; Job 115, 220 hours at $14 per hour; and Job 116, 80 hours at $18 per hour.
  4. Overhead is applied on the basis of direct labor cost.
  5. Actual overhead was $4,415.
  6. Job 115 was completed and transferred to the finished goods warehouse.
  7. Job 115 was shipped, and the customer was billed for 125 percent of the cost.

Required:

1. Calculate the predetermined overhead rate based on direct labor cost.

1170/1800 = 65%

2. Calculate the ending balance for each job as of April 30.

Job 114           24,851
Job 115           22,496
Job 116           18,121

Calculation:

 Job 114Job 115Job 116
WIP-Beginning              5,381                         5,214                10,745
Materials           16,500                       12,200                  5,000
Lab Hour                 150                             220                        80
Wage rate                    12                               14                        18
Lab Cost              1,800                         3,080                  1,440
Overheads              1,170                         2,002                      936
Total           24,851                       22,496                18,121

3. Calculate the ending balance of Work in Process as of April 30.

$24,851 + 18,121 = $42,972

4. Calculate the cost of goods sold for April.

$22,496 (Job 115 being sold)

5. Assuming that Sangvikar prices its jobs at cost plus 25 percent, calculate the price of the one job that was sold during April.

$22,496 x 1.25 = $28,120

Explanation

1. Predetermined OH rate = budgeted OH costs ÷ budgeted amount of driver

2. See Cornerstone 5.1.

3. The balance in Work in Process can be computed by summing the costs of all incomplete jobs.

4. Cost of Goods Sold is the total cost of all jobs sold during the month.

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