Question

During a recent month Pisces, Inc. reported the following activity:

Jobs	1	2	3	4
Beginning Balance	1,500.00	2,000.00	1,000.00	400.00
Direct Materials	-	100.00	1,200.00	3,000.00
Direct Labor	495.00	405.00	300.00	450.00
Direct Labor hours	33.00	27.00	20.00	30.00

Overhead is allocated at $6.25 per direct labour hour. Jobs 1, 2, and 3 were completed, and Job 1 was delivered to the customer. Determine the following amounts:

a) Ending work in process inventory

b) Cost of the jobs that were completed

c) Costs of goods sold

d) Ending finished goods inventory

Answer 1

Solution a:

Computation of cost incurred on Job
Jobs	1	2	3	4
Beginning balance	$1,500.00	$2,000.00	$1,000.00	$400.00
Direct Materials	$0.00	$100.00	$1,200.00	$3,000.00
Direct Labor	$495.00	$405.00	$300.00	$450.00
Allocated overhead	$206.25	$168.75	$125.00	$187.50
Cost Incurred	$2,201.25	$2,673.75	$2,625.00	$4,037.50

Ending WIP inventory = Cost incurred on job 4 = $4,037.50

Solution b:

Cost of the jobs that were completed = Cost of jobs 1, 2 and 3

= $2,201.25 + $2,673.75 + $2,625

= $7,500

Solution c:

Cost of goods sold = Cost of Job 1 = $2,201.25

Solution d:

Ending finished goods inventory = Cost incurred on Job 2 and Job 3 = $2,673.75 + $2,625 = $5,298.75