Lavender Corporation uses a job order costing system and applies manufacturing overhead using a predetermined overhead rate based on direct labor hours. The following data are available for August :
Raw Materials (all direct materials) : Beginning : $28,000 Ending : $32,000
Work In Process : Beginning : $600 Ending : $15,000
Finished Goods : Beginning : $35,000 Ending : $23,000
Actual Costs For August :
Raw Materials Purchase : 51,000
Direct Labor Salaries Paid : $90,000
Direct Labor Pay Rate Per Hour : $15
Manufacturing Overhead : $49,000
Info From Budget : Manufacturing Overhead Budgeted Per Month : $60,000
Direct Labor Hours Budgeted Per Month : 7,500
Question 1) Compute manufacturing cost for August
A) 190,000 B) 201,000 C) 185,000 D) 197,000 E) None
Answer was C) but I need help with steps as to how. Answer was shown as direct materials 47,000 (28 + 51 - 32) plus direct labor $90,000 plus overhead applied of 48,000 (I do not get where this number comes from). for a total of 185,000. Please show me how you would solve and explain where all numbers come from and the logic behind it.
Question 2) For the same company above, but contrary to the fact, assume that cost of goods manufactured for August is $200,000. The adjusted Cost of Goods Sold (adjusting for over or under applied amount all closed out to cost of goods sold) that appears on the income statement is ?
A) 213,000 B) 223,000 C) 212,000 D) 211,000 E) None of above
Answer was A) but I need help with steps as to how.
