Following is information about consulting jobs for a company that is increasing in sales, but has not yet become profitable.
The owner keeps financial records on yellow sticky notes stuck to the wall behind his desk. He has asked you to help him set up a costing system so that he can better understand his costs. The owner said that job 140 was completed, job 141 was started and completed, and job 142 was started this month. Professional labor hours for contracts in process consist of job 140 with 120 hours, job 141 with 240 hours, and job 142 with 140 hours. Professional labor was paid $25,000 for the month, and the professional employees are all paid the same rate per hour. Overhead is allocated using an estimated rate based on professional labor hours. The total cost for job 141 is $30,000.
Actual overhead cost for the month was $48,000.

A. What is labor paid per hour? What is the estimated rate per labor hour used to allocate overhead?
B. What are the total costs (before adjusting for over-applied or under-applied overhead) for jobs 141, 142, and 143?
C. What are the amounts in cost of goods sold and work-in-process at the end of the month?
D. What amount of overhead was over-applied or under-applied this month?
E. If this month is typical, what is a reasonable overhead rate?

  • CreatedJanuary 26, 2015
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