Stock Co. uses a job costing system. The following debits (credits) appeared in Stock's work-in-process account for the month of April:
$\begin{array}{clc}
\text { April } & \text { Description }& \text { Amount }\
1 & \text { Balance } &\$4,000\
30 & \text { Direct materials } &24,000\
30 & \text { Direct labor } &16,000\
30 & \text { Factory overhead }&12,800 \
30 & \text { To finished goods }&(48,000)
\end{array}$

Stock applies overhead to production at a predetermined rate of 80% of direct labor cost. Job No. 5, the only job still in process on April 30 has been charged with direct labor of $2,000. What was the amount of direct materials charged to Job No. 5? (CPA adapted)
A) $3,000.
B) $5,200.
C) $8,800.
D) $24,000.

Question

Stock Co. uses a job costing system. The following debits (credits) appeared in Stock's work-in-process account for the month of April:
$\begin{array}{clc}
\text { April } & \text { Description }& \text { Amount }\
1 & \text { Balance } &\$4,000\
30 & \text { Direct materials } &24,000\
30 & \text { Direct labor } &16,000\
30 & \text { Factory overhead }&12,800 \
30 & \text { To finished goods }&(48,000)
\end{array}$

Stock applies overhead to production at a predetermined rate of 80% of direct labor cost. Job No. 5, the only job still in process on April 30 has been charged with direct labor of $2,000. What was the amount of direct materials charged to Job No. 5? (CPA adapted)
A) $3,000.
B) $5,200.
C) $8,800.
D) $24,000.

Quizplus · Accepted Answer

The total direct labor cost for April is $16,000. The overhead applied is 80% of direct labor, which is $12,800 (0.8 * $16,000). The total cost transferred to finished goods is $48,000. The total cost in WIP before transfer is $56,800 ($4,000 + $24,000 + $16,000 + $12,800). The cost of Job No. 5 is the difference: $56,800 - $48,000 = $8,800. Since Job No. 5 has $2,000 in direct labor and $1,600 in overhead (80% of $2,000), the direct materials charged to Job No. 5 is $8,800 - $2,000 - $1,600 = $5,200.

Stock Co Uses a Job Costing System Stock Applies Overhead to Production at a Predetermined Rate of (Credits)