Minstrel Manufacturing uses a job order costing system. During one month, Minstrel purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, of which $40,000 was indirect labor. Minstrel uses a predetermined overhead application rate of 150% of direct labor cost.
-Minstrel's beginning and ending Work in Process Inventory are $15,500 and $27,000 respectively. Compute the cost of product transferred to Finished Goods Inventory:

Question

Minstrel Manufacturing uses a job order costing system. During one month, Minstrel purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, of which $40,000 was indirect labor. Minstrel uses a predetermined overhead application rate of 150% of direct labor cost. 
-Minstrel's beginning and ending Work in Process Inventory are $15,500 and $27,000 respectively. Compute the cost of product transferred to Finished Goods Inventory:

Quizplus · Accepted Answer

First, we need to calculate the total manufacturing cost:
Total Direct Materials Used = $195,000 - $30,000 = $165,000
Total Direct Labor = $150,000 - $40,000 = $110,000
Total Manufacturing Overhead = 150% x $110,000 = $165,000
Total Manufacturing Cost = $165,000 + $110,000 + $165,000 = $440,000

Next, we need to calculate the cost of goods completed during the month:
Cost of Goods Completed = $440,000 + $15,500 - $27,000 = $428,500

Therefore, the cost of product transferred to Finished Goods Inventory is $428,500, which is option B.

Minstrel Manufacturing Uses a Job Order Costing System