2 54 Job Order Cost Accounting Overhead is applied based on the number of days

2 54 job order cost accounting overhead is applied

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Job Order Cost AccountingOverhead is applied based on the number of days a gown is in process. Usually, five gowns are being worked on at a time. Therefore, each gown is charged 1/5 of a daily estimated overhead amount.Customer Ruth Finney's wedding dress took four days to complete. However, after the first three days had elapsed, Diane Lange, a movie personality, suddenly decided to get married, and ordered a very lavish gown. All other work was suspended, and the work on Ms. Finney's dress was delayed six days. The final day of its construction was on the tenth day after it had been begun.Required:You are the accounting manager for Bridal Treasures. Write a memo to the billing department. Instruct them as to the appropriate number of overhead days to charge to Ms. Finney's account.Solution 144TO:Billing DepartmentFROM: M. Long, Accounting ManagerRE:Overhead billing, Finney accountAs you know, our standard procedure in billing overhead is to simply multiply our daily overhead rate by the number of days the gown was in our possession. However, for the Finney gown, and any other jobs we suspended for the Diane Lange gown, we should not charge for the days the gowns were in our possession but not being worked on.We should adjust the billing for the Diane Lange gown, so that it absorbs the full daily cost of overhead, since it actually was the only job worked on during those six days. The Finney job should be charged only four days of overhead. Other suspended jobs should be treated similarly.Please call if you have questions.(signed)2-55
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  • Spring '11
  • Hernandez
  • Cost Accounting, ........., Factory Labor, Process Inventory, job order cost

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