Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

XYZ Company began operations during 2016 and employs a job-order costing system

ID: 2414875 • Letter: X

Question

XYZ Company began operations during 2016 and employs a job-order costing system that applies overhead to jobs using direct labor hours as the activity level. For 2016, XYZ Company had total estimated overhead of $229,500 and total estimated direct labor hours of 25,500. Listed below is a summary of events and transactions that occurred during 2016:

a. XYZ Company purchased 80,000 pounds of direct materials at $4.20 per pound.

b. XYZ began work on three jobs. Direct materials used for each job were:

Job A-1 .................. 17,000 pounds

Job A-2 .................. 25,000 pounds

Job A-3 .................. 30,000 pounds

c. Direct labor hours used for each job were:

Job A-1 .................. 9,800 hours

Job A-2 .................. 7,800 hours

Job A-3 .................. 8,400 hours

Direct labor workers are paid $12 per hour.

d. The following additional costs were incurred:

Manufacturing Facility : Administrative Facility:

Rent ……………... $ 42,000 $ 15,000

Depreciation ……. 55,000 12,000

Utilities …………. 51,000 10,000

Salaries ………..… 92,000*** 65,000

Totals …………... $ 240,000 $ 102,000

*** This $92,000 is all indirect labor. See letter (c) for direct labor for the manufacturing facility.

e. Jobs A-1 and A-2 were completed during 2016. Job A-2 was sold to the customer for $420,000.

Calculate the total amount of inventory shown on XYZ Company's December 31, 2016 balance sheet. Do not use decimals in your answer.

Explanation / Answer

Solution.

Predetermined overhead rate = $229,500 / 25,500 = $9 per direct labor hour.

Inventory shown on XYZ Company's December 31, 2016 balance sheet.

= 873,600.00 - 268,800.00 = $604,800

Particular Job A-1 Job A-2 Job A-3 Direct material          71,400.00               105,000.00     126,000.00 Direct Labor        117,600.00                 93,600.00     100,800.00 Applied Overhead          88,200.00                 70,200.00     100,800.00 Total cost        277,200.00               268,800.00     327,600.00     873,600.00