Question 1- Custom Cabinets has decided to price their cabinets at 50% above cost. The problem is they are not sure how to assign Factory Overhead. Your manager has asked you to price the following two jobs based on the information provided:
• Estimated Factory Overhead for the year: $500,000
• Estimated Direct Labor Hours for the year: 250,000 hours
• Job 1 has incurred $3,000 of Direct Materials and $2,000 of Direct Labor, which is consistent with 200 hours of labor
• Job 2 has incurred $3,500 of Direct Materials and $3,000 of Direct Labor, which is consistent with 300 hours of labor
Question 2-
A. Assuming Custom Cabinets applies $495,000 of Factory Overhead to all of their jobs this year, but has actual Factory Overhead of $496,000, has overhead been over or underapplied?
B. If the current COGS is $2,000,000, what should the ending COGS be after reconciling the Actual and Applied Overhead?
Question 3- Prepare the journal entries needed based on the information below. Use Lesson 4 page 6 to assist you.
• Estimated Overhead for the month: $10,000
• Estimated Direct Labor Hours: 10,000
• Purchased $25,000 of materials
• Requisitioned $20,500 of materials to be placed into production
• Incurred $14,500 of Direct Labor during the month (1450 hours)
• Incurred the following Actual Factory Overhead Amounts:
o Utilities: 7000
o Indirect Materials: 500
o Indirect Labor: 1000
o Rent: 1000
• Completed 2 jobs with a cost of $10,900
• Sold both jobs completed at a price = cost + 50%
• Applied Overhead is $9,600