Walter Company uses a job-order costing system to account for product costs. The following information pertains to the current year:
$\begin{array}{lr}
\text { Materials placed into production } & \$ 140,000 \
\text { Indirect labour } & 40,000 \
\text { Direct labour (10,000 hours) } & 160,000 \
\text { Depreciation of factory building } & 60,000 \
\text { Other factory overhead } & 100,000 \
\text { Increase in work-in-process inventory } & 30,000
\end{array}$
Factory overhead rate is $18 per direct labour hour.
-Refer to the figure.What is the total amount debited to finished goods inventory?

Question

Walter Company uses a job-order costing system to account for product costs. The following information pertains to the current year:
$\begin{array}{lr}
\text { Materials placed into production } & \$ 140,000 \
\text { Indirect labour } & 40,000 \
\text { Direct labour (10,000 hours) } & 160,000 \
\text { Depreciation of factory building } & 60,000 \
\text { Other factory overhead } & 100,000 \
\text { Increase in work-in-process inventory } & 30,000
\end{array}$ 
Factory overhead rate is $18 per direct labour hour.
-Refer to the figure.What is the total amount debited to finished goods inventory?

Quizplus · Accepted Answer

Total manufacturing cost = $140,000 + $40,000 + $160,000 + $60,000 + $100,000 = $500,000. Total amount debited to finished goods inventory = $500,000 - $30,000 = $470,000. However, since factory overhead is applied at a rate of $18 per direct labour hour, the actual factory overhead cost is $18 x 10,000 = $180,000. Therefore, the total amount debited to finished goods inventory is $470,000 + $180,000 = $490,000.

Walter Company Uses a Job-Order Costing System to Account for Product