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In: Accounting

Garcia, Inc. uses a job-order costing system for its products, which pass from the Machining Department,...

Garcia, Inc. uses a job-order costing system for its products, which pass from the Machining Department, to the Assembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, the Assembly Department performs a number of manual-assembly activities. The company applies manufacturing overhead using machine hours in the Machining Department and direct-labor cost in the Assembly Department. The following information relates to the year just ended:

Machining Department Assembly Department
Budgeted manufacturing overhead $ 4,000,000 $ 3,080,000
Actual manufacturing overhead 4,270,000 3,040,000
Budgeted direct-labor cost (based on practical capacity) 1,500,000 5,600,000
Actual direct-labor cost 1,450,000 5,780,000
Budgeted machine hours (based on practical capacity) 400,000 100,000
Actual machine hours 425,000 110,000


The data that follow pertain to job no. 775, the only job in production at year-end.

Machining Department Assembly Department
Direct material $ 24,500 $ 6,800
Direct labor $ 27,800 $ 58,700
Machine hours 360 150


Selling and administrative expense amounted to $2,500,000.

2. Compute the cost of the company’s year-end work-in-process inventory.

Total cost

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Expert Solution

Job No 775
Calculation of Total cost of Work in Progress Inventory
$ $
Direct Material
Machining Department 24,500
Assembly Department 6,800            31,300
Direct Labour
Machining Department 27,800
Assembly Department 58,700            86,500
Manufacturing Overheads
Machining Department ( Based on Machine Hours) 3,617
Assembly Department ( Based On Direct Labour Cost) 30,873            34,490
Total Cost For Job No 775 ( Work in progress)          152,290

Calculation of Ovrerhead Allocation Rate

Machining Department : Total Actual Manufacturing Overhead/ Actual Machine Hours = 4270,000/425,000 = $10.05/ Machine Hours

Assembly Department : Total Actual Manufacturing Overhead/ Actual Direct Labour Costs = 3040,000/5780,000 = .53/ Direct Labour Cost


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