ob Costs Using a Plantwide Overhead Rate Naranjo Company designs industrial prototypes for outside companies. Budgeted overhead for the year was $332,500, and budgeted direct labor hours were 19,000. The average wage rate for direct labor is expected to be $35 per hour. During June, Naranjo Company worked on four jobs. Data relating to these four jobs follow: Job 39 Job 40 Job 41 Job 42 Beginning balance $22,700 $33,700 $18,600 $1,300 Materials requisitioned 20,500 20,200 13,800 15,700 Direct labor cost 11,600 17,300 8,450 6,600 Overhead is assigned as a percentage of direct labor cost. During June, Jobs 39 and 40 were completed; Job 39 was sold at 110 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. % of direct labor cost 2. Set up a simple job-order cost sheet for all jobs in process during June. Naranjo Company Job-Order Cost Sheets Job 39 Job 40 Job 41 Job 42 Balance, June 1 $ $ $ $ Total $ $ $ $ 3. What if the expected direct labor rate at the beginning of the year was $28 instead of $35? What would the overhead rate be? If required, round your overhead rate answer to one decimal place. New budgeted direct labor cost = $ New overhead rate = % of direct labor cost How would the cost of the jobs be affected?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
ob Costs Using a Plantwide Overhead Rate
Naranjo Company designs industrial prototypes for outside companies. Budgeted overhead for the year was $332,500, and budgeted direct labor hours were 19,000. The average wage rate for direct labor is expected to be $35 per hour. During June, Naranjo Company worked on four jobs. Data relating to these four jobs follow:
| Job 39 | Job 40 | Job 41 | Job 42 | |
| Beginning balance | $22,700 | $33,700 | $18,600 | $1,300 |
| Materials requisitioned | 20,500 | 20,200 | 13,800 | 15,700 |
| Direct labor cost | 11,600 | 17,300 | 8,450 | 6,600 |
Overhead is assigned as a percentage of direct labor cost. During June, Jobs 39 and 40 were completed; Job 39 was sold at 110 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.
% of direct labor cost
2. Set up a simple
| Naranjo Company | ||||
| Job-Order Cost Sheets | ||||
| Job 39 | Job 40 | Job 41 | Job 42 | |
| Balance, June 1 | $ | $ | $ | $ |
| Total | $ | $ | $ | $ |
3. What if the expected direct labor rate at the beginning of the year was $28 instead of $35? What would the overhead rate be? If required, round your overhead rate answer to one decimal place.
New budgeted direct labor cost = $
New overhead rate = % of direct labor cost
How would the cost of the jobs be affected?
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