(Solution Document) hi i cannot figure this out- how are they coming up with the costs of subcontracted work? nor the balance of the work in progress?


hi i cannot figure this out- how are they coming up with the costs of subcontracted work? nor the balance of the work in progress?


Work in Process

 

 

  Costs of subcontracted work

90,000 

  To completed projects

545,500 

  Direct staff costs

199,000 

 

 

  Studio overhead

298,500 

 

 

 

 

      Leeds Architectural Consultants is a service firm, so the names of the accounts it uses are different from the names used in manufacturing companies. Costs of Subcontracted Work is comparable to Direct Materials; Direct Staff Costs is the same as Direct Labor; Studio Overhead is the same as Manufacturing Overhead; and Completed Projects is the same as Finished Goods. Apart from the difference in terms, the accounting methods used by the company are identical to the methods used by manufacturing companies.

 

      Leeds Architectural Consultants uses a job-order costing system and applies studio overhead to Work in Process on the basis of direct staff costs. At the end of January, only one job was still in process. This job (Lexington Gardens Project) had been charged with $13,500 in direct staff costs.

 

Requirement 1:

Compute the predetermined overhead rate that was in use during January. (Omit the "%" sign in your response.)

 

  Predetermined overhead rate

 

Requirement 2:

Complete the following job cost sheet for the partially completed Lexington Gardens Project. (Omit the "$" sign in your response.)

 

Job Cost Sheet?Lexington Gardens Project

As of January 31

  Costs of subcontracted work

$  

  Direct staff costs

$  

  Studio overhead

$  

  Total cost to January 31

$  

 

Explanation:

1:

Because $298,500 of studio overhead was applied to Work in Process on the basis of $199,000 of direct staff costs, the predetermined overhead rate was 150%:

 

Studio overhead applied

=

$298,500

  = 150% rate

Direct staff costs incurred

$199,000

2:

The Lexington Gardens Project is the only job remaining in Work in Process at the end of the month; therefore, the entire $42,000 balance in the Work in Process account at that point must apply to it. Recognizing that the predetermined overhead rate is 150% of direct staff costs, the following computation can be made:

 

 

 

 

  Total cost added to the Lexington Gardens Project

 

$42,000 

  Less: Direct staff costs

$13,500 

 

           Studio overhead cost

 

 

           ($13,500 × 150%)

20,250 

33,750 

  Costs of subcontracted work

 

$8,250 

 

 







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