Stone Cliff Company manufactures custom-order furniture.During 2016,actual manufacturing overhead totaled $720,000.Based on the 2016 results,and projected production for 2017,management prepared the 2017 budget and estimated that manufacturing overhead would total $800,000.The estimated number of direct labor hours for 2017 is 500,000,and the estimated amount of direct labor cost is $1,000,000.The company plans to use direct labor hours as the basis to allocate overhead to jobs.During May and June 2017,employees worked on the following four jobs: All jobs were started in May.Jobs X87 and A33 were completed and delivered to customers during June.What was the balance of the work in process inventory account on June 30?

Question

Stone Cliff Company manufactures custom-order furniture.During 2016,actual manufacturing overhead totaled $720,000.Based on the 2016 results,and projected production for 2017,management prepared the 2017 budget and estimated that manufacturing overhead would total $800,000.The estimated number of direct labor hours for 2017 is 500,000,and the estimated amount of direct labor cost is $1,000,000.The company plans to use direct labor hours as the basis to allocate overhead to jobs.During May and June 2017,employees worked on the following four jobs:  All jobs were started in May.Jobs X87 and A33 were completed and delivered to customers during June.What was the balance of the work in process inventory account on June 30?

Quizplus · Accepted Answer

First, we need to calculate the predetermined overhead rate:

Predetermined overhead rate = Estimated total manufacturing overhead / Estimated total direct labor hours

Predetermined overhead rate = $800,000 / 500,000 hours = $1.60/hour

Next, we need to allocate the manufacturing overhead to the four jobs using the predetermined overhead rate:

Job X87: 300 hours x $1.60/hour = $480
Job A33: 400 hours x $1.60/hour = $640
Job Z46: 200 hours x $1.60/hour = $320
Job B12: 100 hours x $1.60/hour = $160

Total manufacturing overhead allocated = $1,600

Now, we can calculate the total cost of each job:

Job X87: $6,300 + $1,440 + $480 = $8,220
Job A33: $5,400 + $1,920 + $640 = $7,960
Job Z46: $2,700 + $960 + $320 = $3,980
Job B12: $1,350 + $480 + $160 = $1,990

Total cost of all four jobs = $22,150

Since only Jobs X87 and A33 were completed and delivered to customers, their total cost is included in the cost of goods sold for June. Therefore, we need to subtract the total cost of these two jobs from the total cost of all four jobs to find the remaining cost in the work in process inventory account:

Work in process inventory on June 30 = Total cost of all four jobs - Total cost of completed jobs
Work in process inventory on June 30 = $22,150 - ($8,220 + $7,960) = $6,970

Therefore, the balance of the work in process inventory account on June 30 was $6,970, which is closest to option B ($479,520).

Stone Cliff Company Manufactures Custom-Order Furniture