Reference no: EM132536082
Red Fire Inc. produces fire trucks. The company uses a normal job-order costing system to calculate its cost of goods manufactured. The company's policy is to price its job at cost plus 30% markup. On January 1, 2020, there was only one job in process, with the following costs:
Job 200
Direct materials $13,500
Direct labour 18,000
Applied overhead 27,000
Total $58,500
The following balances were taken from the company's general ledger as of January 1, 2020:
Direct materials inventory $45,000
Finished goods inventory (for Job 100) 85,000
During the year 2020, the following events occurred:
- Direct materials were purchased on account for $375,000.
Two more jobs were started: Job 300 and Job 400. Direct materials and direct labour costs incurred by each job in process during the year 2020 were as follows:
Job 200 Job 300 Job 400
Direct materials $150,000 $45,000 $35,000
Direct labour 130,000 45,000 25,000
The company incurred the following actual factory overhead during the year:
Factory rent $135,000
Factory supplies 55,500
Indirect labour 85,750
Jobs 100 and 200 were sold.
Jobs 200 and 300 were completed.
Instructions
Question 1: Calculate the total applied overhead for the year 2020. The factory overhead costs are applied to each job on the basis of direct labour dollars.
Question 2: Prepare simple job cost sheets for jobs 200, 300, and 400 for the year ended December 31, 2020.
Question 3: Determine whether the overhead is over-applied or under-applied. By how much?
Over-applied overhead: $23,750
Question 4: How do you prepare schedule of cost of goods sold, identifying both normal and adjusted cost of goods sold, for the year ended December 31, 2020.
Question 5: Calculate the selling price of Job 200.
Job 200: $693,550
Question 6: Calculate the ending balances as of December 31, 2020, for the following accounts: Direct Materials and Work in Process.
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