Garst Manufacturing is working on two jobs.Cost is accumulated under a job-order costing system,and overhead is applied on the basis of direct labor hours.The company estimated that overhead would be $64,000 and 10,000 direct labor hours would be worked.Both projects were started and completed in the current accounting period.The following transactions were completed during the period: (a)Used $10,000 of direct material on Project I and $6,800 of direct material on Project II.
(b)Labor costs for the two jobs amounted to the following: Project I,$24,000 (2,000 hours); Project II,$44,000 (6,000 hours).
(c)Project II was sold during the period for $120,000.
The ending balance in Work in Process was:
A) $34,000.
B) $0.
C) $46,800.
D) $136,000.

Question

Quizplus · Accepted Answer

To find the ending balance in Work in Process, we need to calculate the total cost for both projects and subtract the cost of Project II, which was sold during the period.

1. Calculate the overhead applied:
Overhead applied = Overhead rate x Actual direct labor hours
Overhead rate = Estimated overhead / Estimated direct labor hours
Overhead rate = $64,000 / 10,000 hours = $6.40 per direct labor hour
Overhead applied for Project I = 2,000 hours x $6.40 = $12,800
Overhead applied for Project II = 6,000 hours x $6.40 = $38,400

2. Calculate the total cost for each project:
Total cost for Project I = Direct materials + Direct labor + Overhead applied
Total cost for Project I = $10,000 + $24,000 + $12,800 = $46,800
Total cost for Project II = Direct materials + Direct labor + Overhead applied
Total cost for Project II = $6,800 + $44,000 + $38,400 = $89,200

3. Calculate the ending balance in Work in Process:
Ending balance in Work in Process = Total cost for both projects - Cost of Project II sold
Ending balance in Work in Process = $46,800 + $89,200 - $120,000 = $16,000

Therefore, the best choice is C ($46,800).

Garst Manufacturing Is Working on Two Jobs