Reference no: EM132520265
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 a. 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 b. Prepare simple job cost sheets for jobs 200, 300, and 400 for the year ended December 31, 2020.
Question c. Determine whether the overhead is over-applied or under-applied. By how much?
Question d. Prepare schedule of cost of goods sold, identifying both normal and adjusted cost of goods sold, for the year ended December 31, 2020.
Question e. Calculate the selling price of Job 200.
Question f. Calculate the ending balances as of December 31, 2020, for the following accounts: Direct Materials and Work in Process.