Sigma corporation applies overhead cost to jobs on the basis of direct labor cost. job v, which was started and completed during the current period, shows charges of $5,000 for direct materials, $8,000 for direct labor, and $6,000 for overhead on its job cost sheet. job w, which is still in process at year-end, shows charges of $2,500 for direct materials and $4,000 for direct labor.

Job V had $8,000 of direct labor, and $6,000 of overhead was applied to the job. $6,000 divided by $8,000 = .75 overhead rate. In other words, the application was based on taking $8,000 of DL x .75 rate = $6,000 overhead.

For Job W, take $4,000 DL x same .75 rate = $3,000

The OH cost to be applied to W at year-end is $3,000.

Answer Link

anthougo anthougo · Answer 2 · 2022-02-15T11:44:09+01:00

The overhead applied to Job W is $3,000.

What is overhead application?

Overhead application is the systematic assignment of factory overhead costs to the production units. The assignment is based on either a standard overhead rate (usually predetermined), or it is computed specific to each reporting period.

Data and Calculations:

Job Sheets:

Job V Job W

Direct materials $5,000 $2,500

Direct labor 8,000 4,000

Applied overhead 6,000 ?

Overhead application basis = direct labor cost

Overhead application rate = 75% ($6,000/$8,000 x 100)

Question Completion:

How overhead cost is applied to Job W?

Thus, the overhead applied to Job W is $3,000 ($4,000 x 75%).

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