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Mary’s Landscaping uses a job order cost system. The following debits (credits) appeared in
Work-In-Process Inventory for August: Description Amount August 1 Balance $6,250 For the month Direct Materials 40,500 For the month Direct Labor 27,000 For the month Factory Overhead 21,600 For the month To finished goods (81,000) Mary’s applies overhead to production at a predetermined rate of 80 percent based on direct
labor cost. Job 3318, which was started during August and is the only job still in process at the
end of august, has been charged direct labor of $3,375.
What cost amount of direct materials was charged to Job 3318?
Given that job 3318 is the only job in process so the entire closing balance of WIP relates to it.
Further, direct labor charges are $3,375 (given) and factory overhead is $2,700 (80% of direct
labor cost). Hence the direct material charge is $8,275, arrived as follows:
WIP closing balance
Less: Direct labor
Less: Factory overhead 14,350
Where in closing WIP is arrived as follows:
Add: Direct Material
Add: Direct Labor
Add: Factory Overhead
Less: Transferred to Finished Goods
- 81,000 Closing WIP --------14,350
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- Spring '11
- Electric charge, Finished Goods, $2,700