Question

Unit Cost, Ending Work-in-Process Inventory, Journal Entries

During August, Skyler Company worked on three jobs. Data relating to these three jobs follow:

	Job 39	Job 40	Job 41
Units in each order	60	100	80
Units sold	—	100	—
Materials requisitioned	$700	$680	$800
Direct labor hours	360	400	200
Direct labor cost	$1,980	$2,480	$1,240

Overhead is assigned on the basis of direct labor hours at a rate of $2.30 per direct labor hour. During August, Jobs 39 and 40 were completed and transferred to Finished Goods Inventory. Job 40 was sold by the end of the month. Job 41 was the only unfinished job at the end of the month.

Required:

1. Calculate the per-unit cost of Jobs 39 and 40. Round unit costs to nearest cent.

Job 39	$ per unit
Job 40	$ per unit

2. Compute the ending balance in the work-in-process inventory account.
$

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1. Manufacturing cost comes from totaling direct materials, direct labor, and overhead on each job. The grand total can be divided by the number of units to determine per-unit cost.

2. Determine which jobs are still in work-in-process and compute the balance.

3. Prepare the journal entries reflecting (a.) the completion of Jobs 39 and 40 and (b.) the sale of Job 40. Make the entry to record the cost of Job 40 first, followed by the entry to record the revenue from its sale. The selling price is 140 percent of cost.

a.	Finished Goods
	Work in Process
b (1).	Cost of Goods Sold
	Finished Goods
b (2).	Accounts Receivable
	Sales Revenue

Answer 1

1. Calculate the per-unit cost of Jobs 39 and 40.

	Job 39	Job 40
Direct materials	$700	$680
Direct labor	1980	2480
Manufacturing overhead applied	(360*$2.30)= 828	(400*$2.30)= 920
Total cost	$3508	$4080
Units in each order	60	100
Unit cost	$58.47	$40.80

2. Compute the ending balance in the work-in-process inventory account

Ending work in process= Job 41= Direct materials+Direct labor+Manufacturing overhead applied

= $800+1240+(200*$2.30)= $2500

3. Prepare the journal entries reflecting (a.) the completion of Jobs 39 and 40 and (b.) the sale of Job 40. Make the entry to record the cost of Job 40 first, followed by the entry to record the revenue from its sale. The selling price is 140 percent of cost.

Transactions	Account titles and explanation	Debit	Credit
a.	Finished Goods ($3508+4080)	$7588
	Work in Process		$7588
	(To record completion of jobs 39 and 40)
b (1).	Cost of Goods Sold	$4080
	Finished Goods		$4080
	(To record cost of goods sold of Job 40)
b (2).	Accounts Receivable ($4080*1.40)	$5712
	Sales Revenue		$5712
	(To record sales of Job 40)