Blaine Corp. makes floats for Mardi Gras in New Orleans. The company\'s fiscal y

Question

Blaine Corp. makes floats for Mardi Gras in New Orleans. The company's fiscal year ends on March 31. On January 1, 2010, the company's WIP Inventory account appeared as follows:

The direct labor cost contained in the beginning balance of WIP Inventory was for a total of 15,200 direct labor hours (DLHs). During January, 7,600 DLHs were recorded. Only one job was still in process on January 31. That job had $73,250. in direct material and 2,850 DLHs assigned to it.

a. If overhead is applied on the basis of DLHs, what predtermined OH rate was in effect during the company's 2009 -2010 fiscal year?

b. What was the average direct labor rate per hour?

c. What amount of direct material cost was in the bginning balance of WIP Inventory?

d. What was the balance of WIP Inventory at the end of January?

e. What was the total cost of Jobs manufactured in January?

Explanation / Answer

a. If overhead is applied on the basis of DLHs, what predtermined OH rate was in effect during the company's 2009 -2010 fiscal year?

Applied overhead/direct labor hours = 127,680/7,600 = $16.80 per direct labor hour

b. What was the average direct labor rate per hour?

Direct labor cost/direct labor hours = 159,600/7,600 = $21 per hour

c. What amount of direct material cost was in the bginning balance of WIP Inventory?

Beginning balance = direct materials + Direct labor + applied overhead

So, Direct materials = beginning balance ­– direct labor – applied overhead

Direct labor = average rate*number of hours = $21*15,200 = $319,200

Applied overhead = rate*number of hours = $16.80*15,200 = $255,360

Direct materials = 916,650 – 319,200 – 255,360 = $342,090

d. What was the balance of WIP Inventory at the end of January?

Ending WIP balance = direct materials + direct labor + applied overhead

Direct labor = hours * average rate = 2,850*21 = $59,850

Applied overhead = hours * rate = 2,850 * 16.80 = $47,880

Ending WIP balance = 73,250 + 59,850 + 47,880 = $180,980

e. What was the total cost of Jobs manufactured in January?

Cost of completed jobs = beginning WIP balance + costs added – ending WIP balance = 916,650 + 589,670 + 159,600 + 127,680 – 180,980 = $1,612,620

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