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

Exercise 41

Job Costing

The following information is for Shiller Company for July 2010:

a. Applied factory overhead costs to jobs at the predetermined rate of $39.50 per labor-hour. Job 1467 incurred 6,175 labor-hours; Job 1469 used 4,275 labor-hours.

---

b. Shipped Job 1467 to customers during July. Job 1467 had a gross margin of 24 percent based on manufacturing cost.

---

c. Job 1469 was still in process at the end of July.

---

d. Closed the overapplied or underapplied overhead to the Cost of Goods Sold account at the end of July.

---

e. Factory utilities, factory depreciation, and factory insurance incurred is summarized by these factory vouchers, invoices, and cost memos:

Utilities	$ 14,250
Depreciation	85,500
Insurance	11,875
Total	$111,625

---

f. Purchased the following direct materials and indirect materials:

---

Material A	$ 25,000
Material B	43,000
Indirect materials	218,650
Total	$286,650

---

g. Direct materials and indirect materials used are as follows:

	Job 1467	Job 1469	Total
Material A	$28,500	$71,250	$ 99,750
Material B	9,500	33,250	42,750
Subtotal	$38,000	$104,500	$142,500
Indirect materials			199,500
Total			$342,000

h. Factory labor incurred for the two jobs and indirect labor is as follows:

Job 1467	$76,000
Job 1469	57,000
Indirect labor	133,000
Total	$266,000

Required

1. Calculate the amount of overapplied or underapplied overhead and state whether the cost of goods sold account will be increased or decreased by the adjustment.

2. Calculate the total manufacturing cost for Job 1467 and Job 1469 for July 2010.

Step 1 of 3

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.