Question

The weekly time tickets indicate the following distribution of labor hours for three direct labor employees:

	Hours
				Process
	Job 301	Job 302	Job 303	Improvement
Tom Couro	9	15	14	2
David Clancy	13	13	14	1
Jose Cano	10	11	16	3

The direct labor rate earned per hour by the three employees is as follows:

Tom Couro	$33
David Clancy	36
Jose Cano	26

The process improvement category includes training, quality improvement, and other indirect tasks.

	Required:
A.	Journalize the entry on July 15 to record the factory labor costs for the week.
B.	Assume that Jobs 301 and 302 were completed but not sold during the week and that Job 303 remained incomplete at the end of the week. How would the direct labor costs for all three jobs be reflected on the financial statements at the end of the week?

Answer 1

A.

Calculation of direct labour costs
	Job 301	Job 302	Job 303	Improvement	Total hours	Rate per hour	Total labour costs
Tom Couro	9	15	14	2	40	33	1320
David Clancy	13	13	14	1	41	36	1476
Jose Cano	10	11	16	3	40	26	1040
						TOTAL	3836

Journal
Date	Particulars	Debit	Credit
15-Jul	Direct Labour expense A/c	3836
	To Bank A/c		3836

B. Since the job 301 and 302 were completed and ready for sale, the direct labour costs would be included in the Finished Goods inventory. For the costs incurred related to Job 303, the labour expenses would form a part of Work in Progress inventory.