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26 April, 19:26

Job costing, unit cost, ending work in process. Rowan Company produces pipes for concert-quality organs. Each job is unique. In April 2016, it completed all outstanding orders, and then, in May 2016, it worked on only two jobs, M1 and M2: A B C 1 Rowan Company, May 2016 Job M1 Job M2 2 Direct materials $ 75,000 $ 56,000 3 Direct manufacturing labour 275,000 209,000 Direct manufacturing labour is paid at the rate of $25 per hour. Manufacturing overhead costs are allo - cated at a budgeted rate of $22 per direct manufacturing labour-hour. Only Job M1 was completed in May. Required: 1. Calculate the total cost for Job M1. 2. 1,600 pipes were produced for Job M1. Calculate the cost per pipe. 3. Prepare the journal entry transferring Job M1 to finished goods. 4. What is the ending balance in the Work-in-Process Control account?

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  1. 26 April, 19:37
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    1. The total cost for Job M1 is $592,000

    2. Cost per unit is $370

    3. Journal

    Finished goods inventory 592,000

    Work in process inventory 592,000

    4. Ending balance in Work-in-Process Control account is $448,920

    Explanation:

    A B C

    1) Rowan Company, May 2016 Job M1 Job M2

    2) Direct materials $ 75,000 $ 56,000

    3) Direct manufacturing labour 275,000 209,000

    Direct manufacturing labour is paid at the rate of $25 per hour

    Manufacturing overhead costs are allocated at a budgeted rate of $22 per direct manufacturing labour-hour

    1. Direct labor rate = $25 per hour

    Direct labor hours used on Job M1 = Direct manufacturing labor : Direct labor rate

    = 275,000 : 25

    = $ 11,000

    Manufacturing overhead applied to Job M1 = Direct labor hours used on Job M1 x 22

    = $11,000 x 22

    = $242,000

    Job cost sheet (Job M1)

    Direct material = $75,000

    Direct labor = $275,000

    Overhead applied = $242,000

    Total cost = $592,000

    2. Cost per unit = Total cost : Number of units

    = 592,000 : 1,600

    = $370

    3. Journal

    Finished goods inventory 592,000

    Work in process inventory 592,000

    4. Direct labor hours used on Job M2 = Direct manufacturing labor/Direct labor rate

    = 209,000 : 25

    = $8,360

    Manufacturing overhead applied to Job M2 = Direct labor hours used on Job M2 x 22

    = $8,360 x 22

    = $183,920

    Job cost sheet (Job M2)

    Direct material = $56,000

    Direct labor = $209,000

    Overhead applied = $183,920

    Total cost = $448,920

    Ending balance in work in process control account = $448,920
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