Job Costing G H M N O 1 Reconstructing accounts 3 DATA INPUT Ledger balances: Ma

Question

Job Costing

G H M N O 1 Reconstructing accounts 3 DATA INPUT Ledger balances: Materials Control 31/8/X7 Work-in-Process 1/8x7 Finished Goods 1/8/X7 Accounts Payable 1/8/X7 30,000 9,700 12,780 5,678 10 Overhead is allocated by using a predetermined rate that is set at the beginning of each year 12 13 by forecasting the year's overhead and using forecast direct labour hours as a cost driver All factory workers receive the same rate of pay 15 16 An interview with the factory foreman revealed the following additional information: $1,900 1 Accounts Payable are for direct materials only. The balance on 31 August was 2 Payments for Accounts Payable made during August were 3 A stocktake after O. Bese's autopsy revealed only one unfinished job in the factory 4 Source documents showed that the one unfinished job had direct labour 5 The direct labour hours in the unfinished job was 6 The direct material in the unfinished job was 7 The finished goods inventory as at 31 August was 8 The budget for 20x7 called for total direct labour hours of 18 19 20 21 $8,700 $2,400 $9,000 300 hours 23 $18,900 3,000 hours 25 9 Budgeted factory overhead is 26 0 Jobs sold during August realised 27 11 Direct labour hours worked during August totalled 28 12 Finished jobs are priced at a percentage mark-up on manufacturing cost 29 $24,000 $88,000 3,700 hours 60% Required: Given this incomplete information, complete the template below and calculate the beginning balance of the Direct Materials Control account. If necessary, round to whole dollars 31 REPORTISOLUTION Direct Materials Control Work-in-Process Finished Goods Accounts Payable Cost of Goods Sold

Explanation / Answer

Beginning balance of Direct Materials Control account: $31098.

Workings:

Predetermined overhead rate = $24000/3000 hours = $8 per direct labor hour

Cost of unfinished job (i.e. ending work-in-process) = Direct material $9000 + Direct labor $2400 + Overheads (300 x $8) $2400 = $13800

Jobs sold during August = $88000

Cost of finished goods sold = $88000/160% = $55000

Direct labor rate = $2400/300 = $8

Costs added $65220 = Direct materials + Direct labor (3700 x $8) + Overheads (3700 x $8)

$65220 = Direct materials + $29600 + $29600

Direct materials = $65220 - $29600 - $29600 = $6020

Beginning balance of direct materials = $30000 + $6020 - $4922 = $31098

Direct Materials Control Work-in-Process Finished Goods 1/8/X7 31098 Issues 6020 1/8/X7 9700 Completed 61120 1/8/X7 12780 55000 Sold Purchases 4922 Costs added 65220 Completed 61120 31/8/X7 30000 31/8/X7 13800 31/8/X7 18900 Accounts Payable Cost of Goods Sold Payments 8700 1/8/X7 5678 55000 Purchases 4922 31/8/X7 1900

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