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A firm uses job costing. 3 jobs in a period are worked as follows:
Job 1
OWIP $8500
DM for the period $17150
DL $12500Job 2
OWIP $0
DM $29025
DL $23000Job 3
OWIP $46000
DM $0
DL $4500Overheads are recovered on a direct labour basis
Overheads were exactly as budgeted $140,000
Job 1&2 remained incomplete at the end of each periodWhat is CWIP value ?
The thing that confuses me here, is although this is similar to the previous question I posted.
The calculation of the overheads include Job 3. Even though Job 3 is now complete
Total DL = 12500+23000+4500= $40,000
Job 1 OH= 12500/40000* $140000 = $43,750
Job 2 OH= 23000/40000*140000= $80,500Why has the sum for DL for Job 3 been included here as part of the OH calculations please?
In my other question, which was very similar:
Job Costing Question (BPP Ch8 P164 Q4)Job BA had already been completed.
Thus the prime costs connected to Job BA were not considered when calculating the OHIn this Question, Job 3 has also been completed.
Yet here the DL for Job 3 costs are taken into consideration when calculating the OH.
ThanksOverheads are absorbed into production on the basis of labohr hours. Job 3 was completed during this period so would benefit from some of this period’s overheads and these would be part of the cost of Job 3 when Job 3 is completed.
In your second question it seems from your wording that BA was already complete. If no more work is done on it this period it will not have anymore overheads charged to it.
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