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On August 1, Cairle Company’s work-in-process inventory consisted of three jobs with the following costs: During August, four more jobs were started. Information on costs added to the seven jobs during the month is as follows: Before the end of August, Jobs 70, 72, 73, and 75 were completed. On August 31, Jobs 72 and 75 were sold. Required: 1. Calculate the predetermined overhead rate based on direct labor cost. 2. Calculate the ending balance for each job as of August 31. 3. Calculate the ending balance of Work in Process as of August 31. 4. Calculate the cost of goods sold for August. 5. Assuming that Cairle prices its jobs at cost plus 20 percent, calculate Cairle’s sales revenue for August.

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

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Chapter
Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 5, Problem 14E
Textbook Problem
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On August 1, Cairle Company’s work-in-process inventory consisted of three jobs with the following costs:

Chapter 5, Problem 14E, On August 1, Cairle Companys work-in-process inventory consisted of three jobs with the following , example  1

During August, four more jobs were started. Information on costs added to the seven jobs during the month is as follows:

Chapter 5, Problem 14E, On August 1, Cairle Companys work-in-process inventory consisted of three jobs with the following , example  2

Before the end of August, Jobs 70, 72, 73, and 75 were completed. On August 31, Jobs 72 and 75 were sold.

Required:

  1. 1. Calculate the predetermined overhead rate based on direct labor cost.
  2. 2. Calculate the ending balance for each job as of August 31.
  3. 3. Calculate the ending balance of Work in Process as of August 31.
  4. 4. Calculate the cost of goods sold for August.
  5. 5. Assuming that Cairle prices its jobs at cost plus 20 percent, calculate Cairle’s sales revenue for August.

1.

To determine

Compute the predetermined overhead rate based on direct labor cost.

Explanation of Solution

Predetermined overhead rate: Predetermined overhead rate is an estimated overhead divided by the estimated level of production activity. It is used to assign overhead to production.

Compute the predetermined overhead rate.

Predetermined Overhaead=Applied overhead[Job70]Directx

2.

To determine

Compute the ending balance for each job as of August 31.

3.

To determine

Compute the ending balance of work in Process as of August 31.

4.

To determine

Compute the cost of goods sold.

5.

To determine

Compute the C Company’s sales revenue for August by assuming that C Company’s prices its job at cost plus 20%.

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Chapter 5 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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