Scotts Outdoor Design began operations on January 2. The company designs outdoor commercial spaces. The following activity
Question:
Scott’s Outdoor Design began operations on January 2. The company designs outdoor commercial spaces. The following activity was recorded in the company’s Work in Process account for the first month of operations:
Work in Process | |||
Costs of subcontracted work | 50,000 | To completed projects | 350,000 |
Direct staff costs | 125,000 | ||
Studio overhead | 250,000 |
Scott’s Outdoor Design is a service firm, so the names of the accounts it uses are different from the names used in manufacturing companies. Costs of Subcontracted Work is comparable to Direct Materials, Direct Staff Costs is equivalent to Direct Labour, Studio Overhead is equivalent to Manufacturing Overhead, and Completed Projects is equivalent to Finished Goods. Apart from the difference in terms, the accounting methods used by the company are identical to the methods used by manufacturing companies.
The company uses a job-order costing system and applies studio overhead to Work in Process on the basis of direct staff costs. At the end of January, only one job was still in process. This job (the XYZ Corporation headquarters project) had been charged with $20,800 in direct staff costs.
1. Compute the predetermined overhead rate that was in use during January.
Complete the following job cost sheet for the partially completed XYZ Corporation headquarters project:
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