Question

Reyes Manufacturing Company uses a job order cost system. At the beginning of January, the company had one job in process (Job 201) and one job completed but not yet sold (Job 200). Job 202 was started during January. Other select account balances follow (ignore any accounts that are not listed). During January, the company had the following transactions: (a) Purchased $70,000 worth of materials on account. (b) Recorded materials issued to production as follows: Job Number 201 202 Indirect materials Total Cost $ 11,100 21,300 5,700 $ 38,100 (c) Recorded factory payroll costs from direct labor time tickets that revealed the following Job Number 201 202 Factory supervision Hours Total Cost 114 $ 2,300 10,500 4,800 $17,600 396 (d) Applied overhead to production at a rate of $29.00 per direct labor hour for 510 actual direct labor hours. (e) Recorded the following actual manufacturing overhead costs Total Cost Item Factory rent S 3,800 4,500 3,100 3,100 $14,500 Paid in cash Factory equipment Incurred but not paid Prepaid policy Factory utilities Factory insurance (f) Completed Job 201 and transferred it to Finished Goods Inventory. (g) Sold Job 200 for $50,300. Job 202 was still in process at the end of January

Answer 1

Part - 1

Notes:

1- materials issued is charged to WIP.

2- Labour Cost is charged to WIP.

3- Direct Overheads based on labour hours are charged to WIP.

4- Cost of finished goods for job 201 is arrived as follows:

Opening Cost of Job 201 = 15500

+Current Material exclusive = 11100

+Indirect Material in the

ratio of 111:213 of 5700 = 1953

+ Direct Labour Cost = 2300

+ Supervision cost in the

ratio of labour cost = 862

+ Production overhhead

@$29/hr for 114 hours = 3306

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Cost of Finished JOB 201 35021

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Note: Alternatively Indirect Materials could be shown in miscellaneous account, as these are not part of raw material but tools and dies, moulds etc. that will effect the raw materials balance. But to keep it simple we have taken it as a part of raw material which is used as common input for both the jobs.

Part - 2

Ending Balance of

(a) Raw Material Inventory = $71,900 or alternatively 71900+5700 = $77,600

(b) Work in Process Inventory = $50,969 (Job 202)

(c) Finished Goods Inventory = $35021 (Job 201)

(d) Cost of Goods Sold = $24,000 (Job 200)

(e) Manufacturing Overhead = $14,500

Part - 3

At the End of Jan - Total Cost of

Job 201 = $35,021

Job 202 = $50,969