Smith Company reports the following information:?Cost of goods manufactured$68,250Direct materials used27,000Direct labor incurred25,000Work in process inventory, January 111,000?Factory overhead is 75% of the cost of direct labor. Work in process inventory on December 31 is
A) $16,250
B) $8,500
C) $18,750
D) $13,500

Question

Quizplus · Accepted Answer

First, we need to determine the total manufacturing costs:

Direct materials used: $27,000
Direct labor incurred: $25,000
Factory overhead (75% of direct labor): $18,750

Total manufacturing costs = $27,000 + $25,000 + $18,750 = $70,750

Next, we need to use the formula:

Cost of goods manufactured = Beginning work in process inventory + Total manufacturing costs - Ending work in process inventory

We are given the cost of goods manufactured ($68,250), the beginning work in process inventory ($11,000), and the total manufacturing costs ($70,750). Solving for the ending work in process inventory, we get:

$68,250 = $11,000 + $70,750 - Ending work in process inventory
Ending work in process inventory = $70,750 - $11,000 - $68,250
Ending work in process inventory = $1,500

Therefore, the answer is D) $13,500.

Smith Company Reports the Following Information:?Cost of Goods Manufactured$68,250Direct Materials