Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 34

Working with Unknowns

Gregson Company uses a job costing system that applies factory overhead on the basis of direct labor dollars. No job was in process on February 1. During the month of February, the company worked on these three jobs:

Job Number
	A23	C76	G15
Direct labor ($8/hour)	$24,000	?	$8,800
Direct materials	42,000	61,000	?
Overhead applied	?	24,750	6,050

During the month, the company completed and transferred Job A23 to the finished goods inventory. Jobs C76 and G15 were not completed and remain in work in process at the cost of $148,650 at the end of the month. Actual factory overhead costs during the month totaled $48,600.

Required

1. What is the predetermined factory overhead rate?

2. Compute the amount of underapplied or overapplied overhead for February.

3. Compute the cost of direct materials issued to production during the month.

Step 1 of 4

Overapplied overhead is the case when the applied factory overhead cost is greater than the actual factory overhead cost. Underapplied overhead is the case when the applied factory overhead cost is lesser than the actual factory overhead cost.