West Corporation’s Manager Assignment

In December 2012, West Corporation’s manager estimated next year’s total direct labor cost assuming 20 persons working an average of 2,000 hours each at an average wage rate of $25 per hour. The manager also estimated the following manufacturing overhead costs for 2018.

 

Indirect labor $    50,000
Factory supervision 60,000
Rent on factory building 60,000
Factory utilities 80,000
Factory insurance 20,000
Depreciation – factory equipment 400,000
Repairs expense – factory equipment 180,000
Factory supplies used 20,000
Miscellaneous production costs 30,000
Total estimated overhead costs $900,000

At the end of 2013, records show that the company incurred $925,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 720, $275,000; Job 721, $200,000; Job 722, $150,000; Job 723, $300,000; Job 724, $105,000. In addition, Job 725 is in process at the end of 2017 and had been charged $50,000 of direct labor. Direct material costs for each of the jobs were as follows: Job 720, $210,000; Job 721, 140,000; Job 722 110,000; Job 723, 260,000; Job 724 130,000; Job 725, 150,000. No jobs were in the process at the end of 2017. The company’s predetermined overhead rate is based on direct labor cost.

Required

  1. Determine the predetermined overhead rate for 2018.
  2. Determine the total overhead cost applied to each of the six jobs during 2018.
  3. Determine the total cost of each of the six jobs at the end of 2018.
  4. Determine the dollar amount that would be transferred from work in process inventory to finished goods inventory and ultimately to cost of goods sold in 2018.
  5. Determine the dollar amount that would remain in work in process inventory at the end of 2018
  6. Determine the over-or under-applied overhead at the end of 2018.
  7. How would you recommend closing out the over- or under-applied overhead? Get Accounting homework help today
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