Job A3B was ordered by a customer on September 25. During the month of September

Question

Job A3B was ordered by a customer on September 25. During the month of September, Jaycee Corporation requisitioned $1,500 of direct materials and used $3,000 of direct labor. The job was not finished by the end of the month, but needed an additional $2,000 of direct materials and additional direct labor of $4,500 to finish the job in October. The company applies overhead at the end of each month at a rate of 200% of the direct labor cost incurred. What is the balance in the Work in Process account at the end of September relative to Job A3B?

Explanation / Answer

Correct answer is $10500. During September month material amounting to $1500 and direct labour amounting to $3000 was introduced in the process and Overheads at the end of each month is 200% of direct labour cost incurred=

200% of $3000 i.e $6000. As specified by the question that the job is not finished at month end and additional material and labour amounting to $2000 and $4500 respectively is required in October month . So the whole cost incurred in September month i.e $1500+$3000+$6000=$10500 is transfereed to Work in progress account . When Job gets finished that is in month of october the whole cost amounting to 10500+2000+4500+(4500*200%) =$ 26000 transfered to Finished Goods Account

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