Question

The company is now beginning to realize their long-term dream: selling costuming.

Johnny believes that “every artist is unique” and would like to track the company’s inventory using a job costing technique. Moira, on the other hand, believes that “all the world’s a stage” and that a process costing technique should work fine. They’ve come to you for help. They’d like to know what their inventory accounts and cost of goods sold would look like under each method. They’ve done their best to compile all of the cost information they believe you’ll need; however, as they are not accountants, it may not be organized ideally. You pick up their file and see the following information:

   

Beginning of the year estimates:
Direct Materials – Cotton	$210,000		WIP Units:	6,800
Direct Materials – Lace	$350,000		BOY WIP Value:	$42,860
Direct Labor	$350,000		WIP Status:
MOH:	$170,000		Input	Completion	Value
Machine Hours:	20,500		Direct Material – Cotton	30% Complete	$11,000
Direct Labor Hours	80,000		Direct Material - Lace	25% Complete	$20,980
Cost Allocation Base	Machine Hours		Conversion Costs	45% Complete	$10,880
End of the year Actuals:
Direct Materials – Cotton	$200,000		WIP Units:	4,420
Direct Materials – Lace	$180,000		WIP Value:	???
Direct Labor	$320,000		WIP Status:
MOH:	$164,000		Input	Completion	Value
Machine Hours:	21,242		Direct Material – Cotton	65% Complete	???
Direct Labor Hours	79,870		Direct Material - Lace	80% Complete	???
Completed Units	18,900		Conversion Costs	90% Complete	???
Direct Material Purchases (total)	$425,000
MOH Bills:
Electric Payable	$42,000		Rent Payable	$36,000
Depreciation	$21,000		Indirect Materials	$12,000
Indirect Labor	$14,000		Taxes Payable	$39,000
Beginning of the year account balances
Direct Materials – total	$50,000		WIP	$82,000
Finished Goods	$17,000

REQUIREMENTS:

1. Calculate the value of the End of Year WIP and Finished Goods using Johnny’s preferred job-costing technique.
2. Journalize all necessary journal entries for this job-costing technique in the job-costing tab of the project template. Johnny prefers any over/under-allocation be closed to COGS.

Answer 1

Assumed Finished are kept as stock.