Question

# ABC Company applies overhead to products using a pre-determined overhead rate of 65% of direct labor...

```ABC Company applies overhead to products using a pre-determined
overhead rate of 65% of direct labor cost. During 2020, ABC
Company began work on three jobs. Information relating to these
three jobs appears below:

Job X        Job Y        Job Z
direct materials .......    \$18,000      \$27,000      \$32,000
direct labor ...........    \$58,000      \$62,000      \$47,000

By the end of 2020, Job Y and Job Z had been completed. Job X was
not completed by the end of 2020. Additionally, by the end of 2020,
one-half of Job Y had been sold while none of Job Z had been sold.

Assume there were no inventories of any type at January 1, 2020.

Calculate ABC Company's finished goods inventory balance reported
on the December 31, 2020 balance sheet.```

Total Cost of Job-Y

Total Cost of Job-Y = Direct material + Direct labor + Overhead applied

= \$27,000 + \$62,000 + [\$62,000 x 65%]

= \$27,000 + \$62,000 + \$40,300

= \$129,300

Total Cost of Job-Z

Total Cost of Job-Z = Direct material + Direct labor + Overhead applied

= \$32,000 + \$47,000 + [\$47,000 x 65%]

= \$32,000 + \$47,000 + \$30,550

= \$109,550

The finished goods inventory balance reported on the December 31, 2020

Therefore, the finished goods inventory balance = [Total Cost of Job-Y x ½] + Total Cost of Job-Z

= [\$129,300 x ½] + \$109,550

= \$64,650 + \$109,550

= \$174,200

“Hence, the finished goods inventory balance reported on the December 31, 2020 balance sheet will be \$174,200”

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