Determining overhead rate, using direct labor cost, direct labor hour and machine hours methods
The following information, taken from the books of Theodore Co., represents the operations for January:
|
Bronzing |
Costing |
Finishing |
|
|
Materials used |
8,000 |
5,000 |
9,000 |
|
Direct labor cost |
1,000 |
500 |
1,620 |
|
Direct labor hours |
4,000 |
5,000 |
2,025 |
|
Factory overhead |
20,000 |
10,000 |
16,200 |
The job cost system is used, and the February cost sheet for Job M45 shows the following:
|
Bronzing |
Casting |
Finishing |
|
|
Materials |
20 |
40 |
20 |
|
Direct labor |
64 |
60 |
54 |
|
Direct labor hours |
8 |
6 |
6 |
|
Machine hours |
2 |
3 |
1 |
|
Bronzing |
Casting |
Finishing |
|
|
Direct labor hours |
15,000 |
9,800 |
20,000 |
|
Factory overhead |
350,000 |
220,000 |
325,000 |
Required:
1. Using the January data, ascertain the factory overhead application rates to be used during February based on the following:
a. Direct labor cost
b. Direct labor hours
c. Factory overhead
2. Prepare a schedule showing the total production cost of Job M45 under each method of applying factory overhead.
3. Prepare the entries to record the following for February operations:
a. The liability for total factory overhead.
b. Distribution of factory overhead to the departments.
c. Application of factory overhead to the work in process, using direct labor hours. (Use the predetermined rate calculated in 1, and separate applied overhead accounts for each department).
d. Closing of the applied factory overhead accounts.
e. Recording under- and overapplied factory overhead and closing the actual factory overhead accounts.