The Samuelson Company uses a job-order costing system.The following data were recorded for June: Overhead is charged to production at 70% of the direct materials cost.Jobs 475,477,and 478 have been delivered to the customer. Samuelson's Work in Process inventory balance on June 30 was:
A) $2,300.
B) $2,720.
C) $2,860.
D) $6,450.

Question

The Samuelson Company uses a job-order costing system.The following data were recorded for June:  Overhead is charged to production at 70% of the direct materials cost.Jobs 475,477,and 478 have been delivered to the customer. Samuelson's Work in Process inventory balance on June 30 was:
A) $2,300. 
B) $2,720. 
C) $2,860. 
D) $6,450.

Quizplus · Accepted Answer

First, we need to calculate the total cost for each job:

Job 475: 
Direct materials = $1,800 
Direct labor = $900 
Overhead = (70% x $1,800) = $1,260 
Total cost = $3,960

Job 476: 
Direct materials = $2,500 
Direct labor = $1,400 
Overhead = (70% x $2,500) = $1,750 
Total cost = $5,650

Job 477: 
Direct materials = $1,200 
Direct labor = $700 
Overhead = (70% x $1,200) = $840 
Total cost = $2,740

Job 478: 
Direct materials = $2,000 
Direct labor = $1,600 
Overhead = (70% x $2,000) = $1,400 
Total cost = $5,000

Total cost of all jobs = $17,350

Next, we need to calculate the total cost of goods completed and transferred out:

Cost of goods completed for Job 475 = $3,960 
Cost of goods completed for Job 477 = $2,740 
Cost of goods completed for Job 478 = $5,000 
Total cost of goods completed and transferred out = $11,700

Finally, we can calculate the Work in Process inventory balance on June 30:

Total cost of all jobs = $17,350 
Total cost of goods completed and transferred out = $11,700 
Work in Process inventory balance = $17,350 - $11,700 = $5,650

However, this is the total Work in Process inventory balance. We need to deduct the cost of Job 476, which is still in process:

Direct materials = $2,500 
Direct labor = $1,400 
Overhead = (70% x $2,500) = $1,750 
Total cost = $5,650

Work in Process inventory balance on June 30 = $5,650 - $5,650 = $0

Therefore, the best choice is B ($2,720) because the Work in Process inventory balance on June 30 is $0.

The Samuelson Company Uses a Job-Order Costing System