Question

Barnville applies overhead at a rate of $6.00 per direct labor hour. The direct labor rate is $10.00 per hour. During June, Jobs B, C, and D were started. The following is information on costs incurred in June:  

Job     Direct materials Direct labor hours                            

A           $200                            5

B            $380                           18

C            $500                           40

D            $150                            8
Jobs A, B and C have been completed. At June 30, only Job D is still is process.

Question 1: Required: Calculate the cost of the completed jobs.

Question 2: Required: What is the balance in Work in process inventory on June 30 (cost of the unfinished job)?

Answer 1

Solution

Barnville

1. Calculation of the cost of the completed jobs:

Jobs	Direct materials cost	Direct labor at $10 per hour	Overhead at $6 per direct labor hour	Total cost
A	$200	$50	$30	$280
B	$380	$180	$108	$668
C	$500	$400	$240	$1,140

Given direct labor hours for the jobs are as follows,

Direct labor cost is calculated as follows,

A         $10 x 5 hrs = $50

B         $10 x 18 hrs = $180

C         $10 x 40 hrs = $400

Overhead cost is calculated as follows,

A         $6 x 5 hrs = $30

B         $6 x 18 hrs = $108

C         $6 x 40 hrs = $240

1. Determination of the balance in work in process inventory on June 30 (cost of the unfinished job):

Job D is unfinished, hence cost of job D represents the balance in work in process inventory as at June 30.

Cost of Job D is computed as follows,

Direct materials$150

Direct labor ($10 x 8 hours)$80

Overhead cost ($6 x 8 hours)$48

Total cost$278

Hence, the balance in work in process inventory on June 30 is $278.

Since the percentage of completion is not provided, the entire cost of Job D is shown as work in process inventory.