Woodie Manufacturing uses a job order cost system and applies overhead to production on the basis of direct labor hours. On January 1, 2023, Job No. 50 was the only job in process. The costs incurred prior to January on this job were direct materials worth $13,000, direct labor worth $7,500, and manufacturing overhead worth $12,000. During the month of January, production began on Jobs 51 and 52, and Jobs 50 and 51 were completed. Job 50 was sold on account during the month for $67,000. The following additional events occurred during the month.
1. Incurred manufacturing overhead costs:
Indirect Materials: $19,000
Depreciation Expense: $9,000
Indirect Labor: $4,750
Other Manufacturing costs: $5,800
2. Assigned direct materials and direct labor to jobs as follows:
Job 50
Direct Material: $5,300.00
Direct Labor: $3,400.00
Direct Labor hours: 230.00
Job 51
Direct Material: $21,500.00
Direct Labor: $12,500.00
Direct Labor hours: 830.00
Job 52
Direct Material: $15,300.00
Direct Labor: $9,100.00
Direct Labor hours: 640.00
3. The company uses direct labor hours as the activity base to assign overhead. Direct labor hours incurred as above.
Required:
a.) Calculate the predetermined overhead rate for 2023, assuming the estimated total manufacturing overhead costs were $555,000, direct labor costs were $300,000, and direct labor hours were 20,500 for the year.
b.) Open job cost sheets for jobs 50, 51, and 52. Enter the January 1 balances on the Job no. 50. Update the job cost sheets for materials labor or overhead allocated, and total any jobs completed during the month.
c.) What is the balance of finished goods inventory at the end of the month?
d.) What is the amount of over or under-applied overhead for the month?
e.) Explain what factors do you think contributed to the over or under-applied overhead for January?