Mar Co. uses a predetermined annual overhead rate under job order costing. In January 2012, Mar incurred $125,000 in manufacturing overhead but applied $113,000 to work in process using the rate. With no beginning or ending work in process, and $590,000 in direct materials, $58,000 in indirect materials, and $107,000 in direct labor, the total cost of jobs completed was $318,000.

1. 1) Under Mar Co.?s job order costing system manufacturing overhead is applied to work in
process using a predetermined annual overhead rate. During January 2012, Mar?s transactions
included the following; Direct materials issued to production 590,000 Indirect materials issued to
production 5 8,000 Manufacturing overhead incurred $125,000 Manufacturing overhead applied
$113,000 Direct labor costs $107,000 Required: Mar Co. had neither beginning nor ending work
in process inventory. What were the costs of jobs completed in January 2012?
Solution
Cost of Completed Job
* Underabsorbed Overheads of 12,000 $ (125000 - 113000) will be charged to Costing Profit and
Loss Account.
Particulars Amount
Direct Materials 90000
Direct Labor Costs 107000
Indirect Materials 8000
Manufacturing Overhead applied 113000
Total Cost of Job Completed 318000