3. MNO has a job costing system. The following are the manufacturing costs durin

Question

3. MNO has a job costing system. The following are the manufacturing costs during the month of February:

Materials placed into production

?

Direct labor (2,000 hours)

$ 80,000

Plantwide overhead applied

$ 40,000

Cost of goods manufactured

$200,000

MNO applies overhead to production on the basis of direct labor hours. The beginning work in process inventory was $18,000 and the ending work in process inventory was $16,000 (the ending work in process had $15,400 of raw materials and 10 hours of direct labor in it at the end of February.

Required:

A.

Determine the predetermined plantwide overhead rate for MNO Company.

B.

Determine the amounts of materials, direct labor, and plantwide overhead included in the February 28 work in process.

C.

Determine the amount of materials placed into production during February.

Materials placed into production

?

Direct labor (2,000 hours)

$ 80,000

Plantwide overhead applied

$ 40,000

Cost of goods manufactured

$200,000

Explanation / Answer

A. Predetermined plantwide overhead rate for MNO Company = Plantwide overhead applied / Direct labor hours

= 40,000 / 2,000

= $20 per hour

B. February 28 work in process = $16,000

Amount of materials = $15,400 (as given in the question itself)

Amount of direct labor = 10 hours x (80,000 / 2,000) per hour

= 10 hours x 40 per hour

= $400

Amount of plantwide overhead = 10 hours x 20 per hour

= $200

C. Amount of materials placed into production during February is calculated as under:

Cost of goods manufactured = Manufacturing costs incurred in the current accounting period + Beginning work-in-process inventory - Ending work-in-process inventory

200,000 = Manufacturing costs incurred in the current accounting period + 18,000 - 16,000

or Manufacturing costs incurred in the current accounting period = 200,000 - 18,000 + 16,000 = $198,000

Now,

Manufacturing costs incurred in the current accounting period = Materials placed into production + Direct labor + Plantwide overhead applied

Therefore,

198,000 = Materials placed into production + 80,000 + 40,000

or Materials placed into production = 198,000 - 80,000 - 40,000 = $78,000

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