Naranjo Company designs industrial prototypes for outside companies. Budgeted overhead for the year was $260,000, and budgeted direct labor hours were 20,000. The average wage rate for direct labor is expected to be $25 per hour. During June, Naranjo Company worked on four jobs. Data relating to these four jobs follow: Jub Job Jeb 41 Jeb 42 eginning balance Materiah requisitioned Direct labor cost $21, 0 S17,000 I8,00 10,000 21A 18,500 12,000 2,900 3,000 Overhead is assigned as a percentage of direct labor cost. During June, Jobs 39 and 40 were completed; Job 39 was sold at 130 percent of cost. (Naranjo had originally developed Job 40 to order for a customer; however, that customer was near bankruptey and the chance of Naranjo being paid was growving dimmer. Naranjo decided to hold Job 40 in inventory while the customer worked our its financial difficulties. Job 40 is the only job in Finished Goods Inventory,) Jobs 41 and 42 remain unfinished at the end of the month. Required: 1. Calculate the overhead rate based on direct labor cost. 2. Set up a simple job-order cost sheet for all jobs in process during June. 3. What ifthe expected direct labor rate at the beginning of the year was $20 instead of $25: What would the overhead rate be? How would the cost of the jobs be affected?
Naranjo Company designs industrial prototypes for outside companies. Budgeted overhead for the year was $260,000, and budgeted direct labor hours were 20,000. The average wage rate for direct labor is expected to be $25 per hour. During June, Naranjo Company worked on four jobs. Data relating to these four jobs follow: Jub Job Jeb 41 Jeb 42 eginning balance Materiah requisitioned Direct labor cost $21, 0 S17,000 I8,00 10,000 21A 18,500 12,000 2,900 3,000 Overhead is assigned as a percentage of direct labor cost. During June, Jobs 39 and 40 were completed; Job 39 was sold at 130 percent of cost. (Naranjo had originally developed Job 40 to order for a customer; however, that customer was near bankruptey and the chance of Naranjo being paid was growving dimmer. Naranjo decided to hold Job 40 in inventory while the customer worked our its financial difficulties. Job 40 is the only job in Finished Goods Inventory,) Jobs 41 and 42 remain unfinished at the end of the month. Required: 1. Calculate the overhead rate based on direct labor cost. 2. Set up a simple job-order cost sheet for all jobs in process during June. 3. What ifthe expected direct labor rate at the beginning of the year was $20 instead of $25: What would the overhead rate be? How would the cost of the jobs be affected?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Naranjo Company designs industrial prototypes for outside
companies. Budgeted overhead for the year was $260,000, and
budgeted direct labor hours were 20,000. The average wage rate
for direct labor is expected to be $25 per hour. During June,
Naranjo Company worked on four jobs. Data relating to these four
jobs follow:
Jub 9
Jeb 41
Jeb 42
Beginning balance
Materials requisitioned
Direct labor cost
$23, 00
18,900
10,000
$34,600
21,400
18,500
S17,000
8,350
3,000
12,000
2,900
Overhead is assigned as a percentage of direct labor cost. During
June, Jobs 39 and 40 were completed; Job 39 was sold at 130
percent of cost. (Naranjo had originally developed Job 40 to order
for a customer; however, that customer was near bankruptcy and
the chance of Naranjo being paid was growing dimmer. Naranjo
decided to hold Job 40 in inventory while the customer worked out
its financial difficulties. Job 40 is the only job in Finished Goods
Inventory.) Jobs 41 and 42 remain unfinished at the end of the
month.
Required:
1. Calculate the overhead rate based on direct labor cost.
2. Set up a simple job-order cost sheet for all jobs in process
during June.
3. What ifthe expected direct labor rate at the beginning of
the year was $20 instead of $25? What would the overhead
rate be? How would the cost of the jobs be affected?
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