Limbaugh Co. uses a job order cost system in the production of unique test equipment

| October 3, 2018

Limbaugh Co. uses a job order cost system in the production of unique test equipment foroil drilling. Limbaugh planned for the following for the fiscal year:Direct Labor $4,000,000.00Overhead $8,000,000.00 applied on basis of direct labor costDirect Material $10,000,000.00Limbaugh had one job in WIP at the beginning of the yearJob A 715Direct Labor $300,000.00Direct Material $480,000.00Limbaugh had one job in finished goods at the beginning of the year:Job A 634Total Cost $600,000.00During the year Limbaugh’s actual costs were:Direct Labor $4,100,000.00Overhead $7,950,000.00Direct Material $10,200,000.00There was one job remaining in finished goods as of year endJob A 796Direct Labor $200,000.00Direct Material $300,000.00There were two jobs remaining in ending WIPJob A 801Direct Labor $50,000.00Direct Material $72,000.00Job A 806Direct Labor $120,000.00Direct Material $150,000.00Required:Calculate the applied overhead rate and use in determiningvalue of WIP, Finished Goods and Cost of Goods SoldIndicate whether overhead was under or over applied anddispose of amount in appropriate manner.If sales for the year were $30,000,000 and operating expense was$5,200,000, prepare an income statement for the year and indicatethe value of ending inventory on the balance sheet.

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