Question

Activity-Based Costing, Unit Cost, Ending Work-in-Process Inventory, Journal Entries

Feldspar Company uses an ABC system to apply overhead. There are three activity rates:

Setting up	$20 per setup
Machining	$5.20 per machine hour
Other overhead	80% of direct labor cost

During September, Feldspar worked on three jobs. Data relating to these jobs follow:

		Job 13-280		Job 13-281		Job 13-282
Units in each order		200		510		100
Units sold		200		—		100
Materials requisitioned		$4,750		$3,800		$5,600
Direct labor cost		$2,000		$4,700		$800
Machine hours		80		100		40
Number of setups		20		15		25

During September, Jobs 13-280 and 13-282 were completed and transferred to Finished Goods Inventory. Job 13-280 was sold by the end of the month. Job 13-281 was the only unfinished job at the end of the month.

Required:

1. Calculate the per-unit cost of Jobs 13-280 and 13-282. Round unit cost to nearest cent.

Job 13-280	$ per unit
Job 13-282	$ per unit

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

$

3. Prepare the journal entries reflecting (a.) the completion of Jobs 13-280 and 13-282 and (b.) the sale of Job 13-280 on account. Make the entry to record the cost of Job 13-280 first, followed by the entry to record the revenue from its sale. The selling price is 150 percent of cost.

a.
b (1).
b (2).

Answer 1

Unit cost and WIP at the end :
Job	13-280	13.282	13.281
Material	$4,750.00	$5,600.00	$3,800.00
Direct Labour Cost	$2,000.00	$800.00	$4,700.00
Overhead:
set up @$20	$400.00	$500.00	$300.00
	($20X20)	($20X25)	($20X15)
Machining @$5.10	$416.00	$208.00	$520.00
	($5.20X80)	($5.20X40)	($5.20X100)
others (80% of DLC)	$1,600.00	$640.00	$3,760.00
Total cost	$9,166.00	$7,748.00	$13,080.00
Number of units	200	100
Unit cost	$45.83	$77.48

1) Unit cost of Job 13-280	$45.83 per Unit
Unit cost of Job 13-282	$77.48 Per Unit

2) WIP inventory at the end = $13080

3) Journal entries:
Date	Accounts Titles	Debit $	Credit $
a	Finished Goods Inventory	$16,914.00
	Work in Process inventory		$16,914.00
b1	Accounts Receivable	$13,749.00
	Sales		$13,749.00
	(=9166*150%)
b2	Cost of goods sold	$9,166.00
	Finished Goods Inventory		$9,166.00