* Some of the listed companies might use either a process costing or a job-order costing
system, depending on the nature of their operations and how homogeneous the final product
is. For example, a plywood manufacturer might use job-order costing if it has a number of
different plywood products that are constructed of different woods or come in markedly
different sizes. In Class #3.2 – Overhead rates; Job Costing
What predetermined overhead rate does the company use to assign overhead cost to jobs?
POR can be found by looking at the information for last month. Last month’s information
includes the MOH (which is the applied amount as part a states “MOH is applied to jobs on the
basis of direct labour cost”. So looking at DL$ in relation to the MOH in November gives you
the POR rate:
Job 105: $20,800 / $13,000 = 1.6 per DL$
You can check this by looking at another job: Job 106: $7,000 x 1.6 = $11,200
What was the manufacturing overhead applied to Job 106 in December?
So, the same rate would be used in December. Job 106’s DL$ for December is $6,000 therefore
the MOH is $6,000 x 1.6 = $9,600.
You can do the same thing to find the MOH for the other 2 jobs.
As stated earlier, Job 105 was completed during December. What was the total cost of Job 105?
Total cost of a job is based on the total openi ng WIP + DM for the present period + DL for the
present period + MOH for the present period.
So the total cost of job 105 would be
Opening WIP = $16,500 + $13,000 + $20,800 = $50,300
DM $ for the present period = $0
DL $ for the present period = $4,000
MOH $ for the present period = $4,000 x 1.6 = $6,400
Total = $60,700
What is the balance in Finished Goods at December 31 st?
First you need to know what jobs are in finished goods at December 31 . In the first paragraph it
states that Job 105 was completed in December. It appears that Jobs 106 and 107 are still in
progress (so are in WIP). The onl y other things you need to consid er then is if there was an
opening balance in FG inventory (at December 1) and if anything was sold in December.
They tell you that the balance at November 30 was $85,000. There is no mention of anything
being sold in December, so you need to assume that the balance would then be opening balance
+ additions - $0 sales = balance at December 31 . st
Opening balance = $85,000
Additions (Job 105) = $60,700 (from earlier in the required)
Sales = $0
Balance = $145,700 Required 3