Limbaugh Co. uses a job order cost system in the production of unique test equipment for oil
Question:
Limbaugh Co. uses a job order cost system in the production of unique test equipment for oil drilling. Limbaugh planned for the following for the fiscal year:
Direct Labor $4,000,000.00
Overhead $8,000,000.00 applied on basis of direct labor cost
Direct Material $10,000,000.00
Limbaugh had one job in WIP at the beginning of the year
Job A 715
Direct Labor $300,000.00
Direct Material $480,000.00
Limbaugh had one job in finished goods at the beginning of the year:
Job A 634
Total Cost $600,000.00
During the year Limbaugh’s actual costs were:
Direct Labor $4,100,000.00
Overhead $7,950,000.00
Direct Material $10,200,000.00
There was one job remaining in finished goods as of year end
Job A 796
Direct Labor $200,000.00
Direct Material $300,000.00
There were two jobs remaining in ending WIP
Job A 801
Direct Labor $50,000.00
Direct Material $72,000.00
Job A 806
Direct Labor $120,000.00
Direct Material $150,000.00
Required:
Calculate the applied overhead rate and use in determining value of WIP, Finished Goods and Cost of Goods Sold
- Indicate whether overhead was under or over applied and dispose of amount in appropriate manner.
If sales for the year were $30,000,000 and operating expense was $5,200,000, prepare an income statement for the year and indicate
the value of ending inventory on the balance sheet.
Accounting Tools for Business Decision Making
ISBN: 978-1118128169
5th edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso