Fact Pattern: Hamilton Company uses job-order costing. Factory overhead is applied to production at a predetermined rate of 150% of direct labor cost. Any over- or underapplied factory overhead is closed to the cost of goods sold account at the end of each month. Additional information is available as follows:
• Job 101 was the only job in process at January 31, with accumulated costs as follows:
Direct materials $4,000
Direct labor 2,000
Applied factory overhead 3,000
Total manufacturing costs $9,000
• Jobs 102, 103, and 104 were started during February.
• Direct materials requisitions for February totaled $26,000.
• Direct labor cost of $20,000 was incurred for February.
• Actual factory overhead was $32,000 for February.
• The only job still in process on February 28 was Job 104, with costs of $2,800 for direct materials and $1,800 for direct labor.
Question: 1 The cost of goods manufactured for February was
A. $85,000
B. $78,000
C. $77,700
D. $79,700
Answer (C) is correct.
COGM is the sum of the costs in BWIP and all the costs incurred during the period minus the costs in EWIP. The calculation of COGM uses applied overhead ($30,000 = $20,000 DL cost × 150%). The $7,300 in EWIP includes $2,800 for direct materials, $1,800 for direct labor, and $2,700 for applied overhead (at 150% of DL cost).
BWIP $ 9,000
Direct labor 20,000
Applied OH 30,000
Direct materials 26,000
EWIP (7,300)
COGM $77,700
I don't understand how to you calculate the $2700 for applied overhead to job 104. Can anyone explain?
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