Question

2. Smith Company employs a Job Order Costing system and keeps perpetual inventory records. The following transactions occurred in the first month of operations: (February) (Hint: read the entire problem including what you are requested to answer.... may save you some time...not all information will be used) a) DM requisitioned during the month: Job 101 $ 40,000 Job 102 $ 15,000 Job 103 $ 23,000 Job 104 $ 8,000 b) Direct Labor Incurred and charged to jobs during the month : Job 101 $ 15,000 Job 102 $ 8,000 Job 103 $ 17,000 Job 104 $ 3,000 c) FOH is applied to jobs using a predetermined overhead rate of 40% of direct labor costs. d) Jobs 101 and 102 were completed during February. e) Job 102 was sold. Required: (SHOW ALL WORK and CALCULATIONS) (1) What is the amount of WIP on February 28? (2) What is the amount of Finished goods on February 28?

Answer 1

Part 1:

Only Job 3 and Job 4 remains incomplete till the February 28. Hence, the amount of WIP on 28 February will include the costs incurred till date for the Job 3 and Job 4, whcih has been computed as follows.

Computation of amount of WIP on February 28: Job 3 Direct materials costs $ 23,000 $ Direct labor costs $ 17,000 $ Manufacturing overhead* $ 6,800 $ Amount of WIP on February 28 *Manufacturing overhead 17000*40%, 3000*40% Job 4 28,000 $ 3,000 $ 1,200 $ $ Total 51,000 20,000 8,000 79,000

Part 2:

Job 1 and Job 2 have been finished but only the Job 2 has been sold. Hence, the finished goods inventory as on 28 February will include the cost of Job 1 only, whcih has been computed as follows.

Computation of amount of finished goods on February 28: Job 1 Direct materials costs $ 40,000 Direct labor costs $ 15,000 Manufacturing overhead* $ 6,000 Amount of finished goods on February 28 $ 61,000 *Manufacturing overhead 15000*40%

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