During a recent month Pisces, Inc. reported the following activity: Overhead is

Question

During a recent month Pisces, Inc. reported the following activity:

Overhead is allocated at $6.25 per direct labour hour. Jobs 1, 2, and 3 were completed, and Job 1 was delivered to the customer. Determine the following amounts:

a) Ending work in process inventory

b) Cost of the jobs that were completed

c) Costs of goods sold

d) Ending finished goods inventory

Jobs 1 2 3 4 Beginning Balance     1,500.00     2,000.00     1,000.00        400.00 Direct Materials                 -          100.00     1,200.00     3,000.00 Direct Labor        495.00        405.00        300.00        450.00 Direct Labor hours          33.00          27.00          20.00          30.00

Explanation / Answer

Solution a:

Ending WIP inventory = Cost incurred on job 4 = $4,037.50

Solution b:

Cost of the jobs that were completed = Cost of jobs 1, 2 and 3

= $2,201.25 + $2,673.75 + $2,625

= $7,500

Solution c:

Cost of goods sold = Cost of Job 1 = $2,201.25

Solution d:

Ending finished goods inventory = Cost incurred on Job 2 and Job 3 = $2,673.75 + $2,625 = $5,298.75

Computation of cost incurred on Job Jobs 1 2 3 4 Beginning balance $1,500.00 $2,000.00 $1,000.00 $400.00 Direct Materials $0.00 $100.00 $1,200.00 $3,000.00 Direct Labor $495.00 $405.00 $300.00 $450.00 Allocated overhead $206.25 $168.75 $125.00 $187.50 Cost Incurred $2,201.25 $2,673.75 $2,625.00 $4,037.50

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