Question

Activity-Based Costing, Unit Cost, Ending Work-in-Process Inventory, Journal Entries

Feldspar Company uses an ABC system to apply overhead. There are three activity rates:

Setting up	$20 per setup
Machining	$5.20 per machine hour
Other overhead	70% of direct labor cost

During September, Feldspar worked on three jobs. Data relating to these jobs follow:

		Job 13-280		Job 13-281		Job 13-282
Units in each order		200		500		100
Units sold		200		—		100
Materials requisitioned		$4,720		$3,700		$5,800
Direct labor cost		$2,000		$4,700		$800
Machine hours		80		100		40
Number of setups		20		15		25

During September, Jobs 13-280 and 13-282 were completed and transferred to Finished Goods Inventory. Job 13-280 was sold by the end of the month. Job 13-281 was the only unfinished job at the end of the month.

Required:

1. Calculate the per-unit cost of Jobs 13-280 and 13-282. Round unit cost to nearest cent.

Job 13-280	$ per unit
Job 13-282	$ per unit

2. Compute the ending balance in the work-in-process inventory account.

$

3. Prepare the journal entries reflecting (a.) the completion of Jobs 13-280 and 13-282 and (b.) the sale of Job 13-280 on account. Make the entry to record the cost of Job 13-280 first, followed by the entry to record the revenue from its sale. The selling price is 150 percent of cost.

a.	Finished Goods	$	BLANK
	Work in Process	BLANK	$
b (1).	Cost of Goods Sold	$	Blank
	Finished Goods	BLANK	$
b (2).	Accounts Receivable	$	blank
	Sales Revenue	blank	$

Answer 1

Part 1

Job 13-280:
Direct materials		4720
Direct labor		2000
Applied overhead:
Setting up (20*20)	400
Machining (80*5.20)	416
Other overhead (2000*70%)	1400	2216
Total job cost		8936
Unit cost (8936/200)		$44.68

Job 13-282:
Direct materials		5800
Direct labor		800
Applied overhead:
Setting up (25*20)	500
Machining (40*5.20)	208
Other overhead (800*70%)	560	1268
Total job cost		$7868
Unit cost ($7868/100)		$78.68

Part 2

Job 13-281:
Direct materials		3700
Direct labor		4700
Applied overhead:
Setting up (15*20)	300
Machining (100*5.20)	520
Other overhead (4700*70%)	3290	4110
Ending Work in Process		$12510

Part 3

No.	Account titles and explanation	Debit	Credit
a	Finished goods	16804
	Work in process (8936+7868)		16804
b(1)	Cost of Goods Sold	8936
	Finished goods		8936
b(2)	Accounts Receivable.	13404
	Sales revenue (8936*150%)		13404