Caitlin's Custom Decorations provides a service, decorating homes. Its Direct Material Inventory consists primarily of festive, seasonal decorations. MOH costs are low due to the nature of the business. The applied MOH rate is $10 per direct labor hour.
As of November 30, the company the following balances in its inventory accounts:
During December, the following events occurred:
1) Purchased direct materials costing $10,000 on account.
2) Used $12,600 of direct materials for jobs. No indirect material costs were incurred during the month.
3) Paid wages for 100 hours of labor ($25/hr).
4) Applied MOH cost to jobs.
5) Actually incurred $1,800 in MOH costs.
6) Completed all jobs by the end of the month.
7) Billed clients $50,000 for jobs completed.
Required:
a. Calculate the ending balances in all inventory accounts as of December 31.
b. Close any underapplied or overapplied MOH directly to COGS.
c. Determine the company's total cost of goods completed and COGS in December.
d. How much gross margin did the company earn in December?

Question

Caitlin's Custom Decorations provides a service, decorating homes. Its Direct Material Inventory consists primarily of festive, seasonal decorations. MOH costs are low due to the nature of the business. The applied MOH rate is $10 per direct labor hour.
As of November 30, the company the following balances in its inventory accounts:
  During December, the following events occurred:
1) Purchased direct materials costing $10,000 on account.
2) Used $12,600 of direct materials for jobs. No indirect material costs were incurred during the month.
3) Paid wages for 100 hours of labor ($25/hr).
4) Applied MOH cost to jobs.
5) Actually incurred $1,800 in MOH costs.
6) Completed all jobs by the end of the month.
7) Billed clients $50,000 for jobs completed.
Required:
a. Calculate the ending balances in all inventory accounts as of December 31.
b. Close any underapplied or overapplied MOH directly to COGS.
c. Determine the company's total cost of goods completed and COGS in December.
d. How much gross margin did the company earn in December?

Quizplus · Accepted Answer

The Answer of Caitlin's Custom Decorations provides a service, decorating homes. Its Direct Material Inventory consists primarily of festive, seasonal decorations. MOH costs are low due to the nature of the business. The applied MOH rate is $10 per direct labor hour.
As of November 30, the company the following balances in its inventory accounts:
  During December, the following events occurred:
1) Purchased direct materials costing $10,000 on account.
2) Used $12,600 of direct materials for jobs. No indirect material costs were incurred during the month.
3) Paid wages for 100 hours of labor ($25/hr).
4) Applied MOH cost to jobs.
5) Actually incurred $1,800 in MOH costs.
6) Completed all jobs by the end of the month.
7) Billed clients $50,000 for jobs completed.
Required:
a. Calculate the ending balances in all inventory accounts as of December 31.
b. Close any underapplied or overapplied MOH directly to COGS.
c. Determine the company's total cost of goods completed and COGS in December.
d. How much gross margin did the company earn in December?

Caitlin's Custom Decorations Provides a Service, Decorating Homes