The following account balances at the beginning of January were selected from the general ledger of Sailor Manufacturing Company: Work in process inventory $0
Raw materials inventory $26,000
Finished goods inventory $46,000
Additional data:
1)Actual manufacturing overhead for January amounted to $62,000.
2)Total direct labor cost for January was $57,000.
3)The predetermined manufacturing overhead rate is based on direct labor cost.The budget for the year called for $300,000 of direct labor cost and $360,000 of manufacturing overhead costs.
4)The only job unfinished on January 31 was Job No.1002,for which total direct labor charges were $6,300 (800 direct labor hours)and total direct material charges were $12,000.
5)Cost of direct materials placed in production during January totaled $101,000.There were no indirect material requisitions during January.
6)January 31 balance in raw materials inventory was $32,000.
7)Finished goods inventory balance on January 31 was $34,500.
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What is the work in process inventory balance on January 31?

Question

Quizplus · Accepted Answer

The formula for calculating Work in Process is:
Work in Process = Direct Materials + Direct Labor + Manufacturing Overhead - Cost of Goods Manufactured
Using the given data, we can calculate the Cost of Goods Manufactured as follows:
Direct Materials: $101,000
Direct Labor: $57,000
Manufacturing Overhead: (Predetermined overhead rate x Direct labor cost)
Predetermined overhead rate = Manufacturing overhead costs / Direct labor costs
Predetermined overhead rate = $360,000 / $300,000 = $1.20 per direct labor dollar
Manufacturing Overhead = $1.20 x $57,000 = $68,400
Total Cost of Goods Manufactured = $101,000 + $57,000 + $68,400 = $226,400
Work in Process = Direct Materials + Direct Labor + Manufacturing Overhead - Cost of Goods Manufactured
For Job No. 1002 :
Direct Materials = $12,000
Direct Labor = $6,300
Manufacturing Overhead = (Predetermined overhead rate x Direct labor cost)
Manufacturing Overhead = $1.20 x $6,300 = $7,560
Cost of Goods Manufactured = Direct Materials + Direct Labor + Manufacturing Overhead
Cost of Goods Manufactured = $12,000 + $6,300 + $7,560 = $25,860
We can now calculate the Work in Process using the formula:
Work in Process = Direct Materials + Direct Labor + Manufacturing Overhead - Cost of Goods Manufactured
Work in Process = $32,000 + $0 + $54,440 - $25,860 = $60,580 - $25,860 = $34,720
Therefore, the Work in Process balance on January 31 is $34,720, and the best choice is B.

The Following Account Balances at the Beginning of January Were