shery28 Posts: 3, Reputation: 1 New Member #1 Jul 9, 2009, 12:30 AM
For 2008, Edgar Mfg. decided to apply overhead to units based on direct labor hours. The company's Work in Process Inventory on January 31,

Beginning balance 68,000
Direct material 130,700
Direct labor 87,500

Cost of completed jobs?

The direct labor cost contained in the \$68,000 beginning balance of Work in Process Inventory was for a total of 5,000 direct labor hours. During January, 7,000 direct labor hours were recorded. Only one job was still in process on January 31. That job had \$20,250 in direct material and 1,850 direct labor hours assigned to it.

a. What was the predetermined overhead rate for 2008?
b. What was the average direct labor rate per hour?
c. What was the balance in Work in Process Inventory at the end of January?
d. What was the total cost of jobs completed in January?
 rehmanvohra Posts: 739, Reputation: 27 Senior Member #2 Jul 10, 2009, 12:35 AM
Originally Posted by shery28
For 2008, Edgar Mfg. decided to apply overhead to units based on direct labor hours. The company's Work in Process Inventory on January 31,

beginning balance 68,000
direct material 130,700
direct labor 87,500

cost of completed jobs ??

The direct labor cost contained in the \$68,000 beginning balance of Work in Process Inventory was for a total of 5,000 direct labor hours. During January, 7,000 direct labor hours were recorded. Only one job was still in process on January 31. That job had \$20,250 in direct material and 1,850 direct labor hours assigned to it.

a. What was the predetermined overhead rate for 2008?
b. What was the average direct labor rate per hour?
c. What was the balance in Work in Process Inventory at the end of January?
d. What was the total cost of jobs completed in January?
I think the opening in process figure needs to be detailed as to direct materials, direct labor and overheads. If it is assumed that the labor cost rate is the same as for 2008 - 87,500/7,000 = 12.50, then the total labor cost in the inventory is 62,500 (5000 x 12.50). Again, how much in terms of percentage is the work complete as to materials and conversion costs. This is necessary to complete the answer.

However, going by the question, it can be said that:
1. Overhead rate = 62,300/7000 = 8.90 per labor hour
2. Average direct labor hour rate = 87,500/7000 = 12.50 per hour
3. Balance of WIP
Direct materials 20,250
Direct labor 23,125
Total 59,840
4. Cost of jobs completed 288,680:
Opening WIP + DM +DL +Overheads -Closing WIP
 shery28 Posts: 3, Reputation: 1 New Member #3 Jul 10, 2009, 04:01 AM

Thank you very much...
Until next time...
God bless you!!

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