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On August 1, Cairle Company’s work-in-process inventory consisted of three jobs with the following costs

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

On August 1, Cairle Company’s work-in-process inventory consisted of three jobs with the following costs:

Job 70Job 71Job 72
Direct materials$1,600$2,000$850
Direct labor1,9001,300900
Applied overhead1,425975675

During August, four more jobs were started. Information on costs added to the seven jobs during the month is as follows:

Job 70Job 71Job 72Job 73Job 74Job 75Job 76
Direct materials$800$1,235$3,550$5,000$300$560$80
Direct labor1,0001,4002,2001,800600860172

Before the end of August, Jobs 70, 72, 73, and 75 were completed. On August 31, Jobs 72 and 75 were sold.

Required:

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

$1,425/1,900 = 75%

2. Calculate the ending balance for each job as of August 31.

Answer:

Job 70$7,475
Job 71$7,960
Job 72$9,825
Job 73$8,150
Job 74$1,350
Job 75$2,065
Job 76$381

Calculation

Job 70Job 71Job 72
Direct materials$1,600$2,000$850
Direct labor1,9001,300900
Applied overhead1,425975675
Total WIP$4,925$4,275$2,425
Job 70Job 71Job 72Job 73Job 74Job 75Job 76
Beginning balance$4,925$4,275$2,425
Direct materials$800$1,235$3,550$5,000$300$560$80
Direct labor1,0001,4002,2001,800600860172
Overheads$750$1,050$1,650$1,350$450$645$129
$7,475$7,960$9,825$8,150$1,350$2,065$381

3. Calculate the ending balance of Work in Process as of August 31.

Job 71 + Job 74 + Job 76 = $9,691

4. Calculate the cost of goods sold for August.

Job 72 + Job 75 = $11,890

5. Assuming that Cairle prices its jobs at cost plus 20 percent, calculate Cairle’s sales revenue for August.

$11,890 x 1.20 = $14,268

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