Naranjo Company designs industrial prototypes for external companies. Budgeted overhead for the year was $260,000 and budgeted
Question:
Naranjo Company designs industrial prototypes for external companies. Budgeted overhead for the year was $260,000 and budgeted direct labor hours were 20,000. The average direct labor wage is expected to be $25 per hour. During the month of June, the Naranjo Company worked in four jobs. The data related to these four works are the following:
work 39 | work 40 | work 41 | work 42 | |
Opening balance | $23,700 | $34,600 | $17,000 | $0 |
requested materials | 18,900 | 21,400 | 8,350 | 12,000 |
Direct labor cost | 10,000 | 18,500 | 3,000 | 2,900 |
Overhead is allocated as a percentage of direct labor cost. During June, works 39 and 40 were completed; Job 39 was sold at 130 percent of cost. (Naranjo had originally developed Job 40 at the request of a client; however, that client was on the verge of bankruptcy and the chance of Naranjo getting paid was dwindling. Naranjo decided to keep Job 40 in inventory while the client was solving his financial difficulties Job 40 is the only job in finished goods inventory). Jobs 41 and 42 remain unfinished at the end of the month.
Required:
1. Calculate the overhead rate based on direct labor cost.
2. Establish a single job cost sheet for all jobs in process during June.
Cornerstones of Cost Management
ISBN: 978-1285751788
3rd edition
Authors: Don R. Hansen, Maryanne M. Mowen