Question

Lanyard Company uses a job-order costing system to account for product costs. The following information pertains to 2014:

Materials placed into production $170,000

Indirect labor 40,000

Direct labor (10,000 hours) 160,000

Depreciation of factory building 60,000

Other factory overhead 100,000

Increase in work-in-process inventory 20,000

Factory overhead rate is $20 per direct labor hour.

1. Refer to Figure 5-4. What is the total amount credited to Materials Inventory for Lanyard in 2014?

2. Refer to Figure 5-4. What is the total amount debited to Finished Goods Inventory in 2011?

Answer 1

Requirement-1: Total amount credited to Materials Inventory for Lanyard in 2014 will be equal to materials placed into production. Therefore, Total amount credited to Materials Inventory for Lanyard in 2014 $170,000 Requirement-2: Materials placed into production $170,000 Add: Direct labour $ 160,000 Add: Factory overhead - applied $200,000 (10,000 hours times $ 20) Total debits to work-in-process inventory $ 530,000 Less: Increase in work-in-process inventory - $20,000 Total amount debited to Finished Goods Inventory $510,000 NOTE: As it is given that factory overhead is applied at $20 per direct labor hour, actual factory overhead costs shall be accounted for separately. At the end, under- or over-applied overhead shall be closed to cost of goods sold. So, actual factory overhead costs are not considered in above calculation.