Question

Jagjit Company designs and builds retaining walls for individual customers. On August 1, there were two jobs in process:
Job 93 with a beginning balance of $8,750
Job 94 with a beginning balance of $7,300.
Jagjit applies overhead at the rate of $8 per direct labor hour.
Direct labor wages average $18 per hour.
Data on August costs for all jobs are as follows:
Job 93 Job 94 Job 95 Job 96
Direct materials $950 $4,500 $3,300 $1,300
Direct labor cost 2,160 5,400 2,610 900
During August, Jobs 95 and 96 were started.
Job 93 was completed on August 17 and the client was billed at cost plus 40%.
All other jobs remained in process.
Required:
1. Calculate the number of direct labor hours that were worked on each job in August.
2. Calculate the overhead applied to each job during the month of August.
3. Prepare job-order cost sheets for each job as of the end of August.
4. Calculate the balance in Work in Process on August 31.
5. What is the price of Job 93?

Answer 1

Answer and Explanation:

1. The computation of the number of direct labor hours for each job is as follows

Number of direct labor hours = Direct labor per cost ÷ direct labor wage rate per hour

For Job 93

= $2,160 ÷ $18 per hour

= 120 hours

For job 94

= $5,400 ÷ $18 per hour

= 300 hours

For job 95

= $2,610 ÷ $18 per hour

= 145 hours

For job 96

= $900 ÷ $18 per hour

= 50 hours

2. The overhead applied for each job is

Overhead applied is

= Number of direct labor hours × overhead rate

For Job 93

= 120 hours × $8

= $960

For job 94

= 300 hours × $8

= $2,400

For job 95

= 145 hours × $8

= $1,160

For job 96

= 50 hours × $8

= $400

3. The preparation of the job order cost sheet is presented below:

Particulars       Job 93          Job 94          Job 95            Job 96

Beginning

balance            $8,750         $7,300

Direct

materials         $950             $4,500        $3,300               $1,300

Direct

labor                $2,160          $5,400         $2,610               $900

Applied

overhead         $960            $2,400         $1,160               $400

Total                $12,820         $19,600       $7,070              $2,600

4. The balance in work in process as on August 31 is

= Total job cost - cost of completed jobs

= ($12,820 + $19,600 + $7,070 + $2,600) - $12,820

= ($42,090 - $12,820)

= $29,270

5. Now the price of Job 93 is

= Job cost of 93 + Job cost of 93 × given percentage

= $12,820 + $12,820 × 40%

= $12,820 + $5,128

= $17,948