ePrintLimited started January 1, 20x4. The company uses a normal-costing system.
ID: 2772447 • Letter: E
Question
ePrintLimited started January 1, 20x4. The company uses a normal-costing system. It has two direct cost pools, materials and labour, and one indirect cost pool, overhead. Overhead is charged to printing jobs on the basis of direct labour cost. The following information is available for 20x4.
Budgeted direct labour costs $150,000
Budgeted overhead costs $180,000
Costs of actual material used $126,500
Actual direct labour costs $148,750
Actual overhead costs $176,000
There were two jobs in process on 31 December 20x4: Job P13 and Job P14. Costs added to each job as of 31 December are as follows:
Direct materials Direct labor
Job P13 $3,620 $4,500
Job P14 $6,830 $7,250
ePrint Limited has no finished goods inventories because all printing jobs are transferred to cost of goods sold when completed
1) Calculate the balance in ending work in process and cost of goods sold before any adjustment for under- or over-allocated overhead
Explanation / Answer
Calculate the ending balance in work in progress.
Job P13
Direct materials = $3,620
Direct Labor = $4,500
Overheads = $4,500 * ($180,000/$150,000) = $5,400.
Total cost of P13 = $13,520
Job P14
Direct materials = $6,830
Direct Labor = $7,250
Overheads = $7,250 * ($180,000/$150,000) = $8,700.
Total cost of P14 = $22,780.
Therefore, ending balance in work in progress = $13,520+$22,780 = $36,300.
Compute the cost of goods sold.
Direct materials = $126,500.
Direct Labor = $148,750
Overheads = 148,750*1.2 = $178,500.
Less: Closing work in progress = $36,300
Cost of Goods sold = $417,450.
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