Reference no: EM133157781

Question - Redbrick Inc., which uses a job-costing system, began business on January 1, 2021 and applies manufacturing overhead on the basis of direct-labor cost (dollars). Budgeted direct labor and manufacturing overhead were anticipated to be $1,500,000 and $31,200,000, respectively.

During the year, the company worked on 3 jobs, A134, A135 and A136. The following charges were made during the period.

Job No.	Direct Material	Direct Labor
A134	$195,000	$210,000
A135	235,000	570,000
A136	585,000	640,000

During the year, Job No. A135 and A136 were completed. Job A134 was not finished by the year end. Redbrick had actual manufacturing overhead by year-end totaled $32,490,000. Redbrick believes that any differences between actual and applied overhead is considered to be minimal (not significant).

Required -

1. Compute the company's predetermined overhead application rate.

2. Compute Redbrick's ending work-in-process inventory.

3. Prepare the journal entry to dispose of the under-or-overapplied overhead if it is considered immaterial (insignificant) in amount. Show all calculations to receive full marks.

4. The management at Redbrick is aware of Activity Based Costing (ABC). The construction manager was asked about the 3 jobs, and he indicated that the jobs were pretty similar to complete each as this is what the company is known for. Would you recommend the company move to ABC costing? How might it help them if they did?