Birk Co.uses a job order costing system.The following debits (credits)appeared in Birk's work-in-process account for the month of April: Birk applies overhead to production at a predetermined rate of 80% of direct labor cost.Job No.5,the only job still in process on April 30 has been charged with direct labor of $2,000.What was the amount of direct material charged to Job No.5? (CPA adapted)

Question

Birk Co.uses a job order costing system.The following debits (credits)appeared in Birk's work-in-process account for the month of April:  Birk applies overhead to production at a predetermined rate of 80% of direct labor cost.Job No.5,the only job still in process on April 30 has been charged with direct labor of $2,000.What was the amount of direct material charged to Job No.5? (CPA adapted)

Quizplus · Accepted Answer

To calculate the direct materials charged to Job No. 5, we need to subtract the beginning balance of raw materials in work in process from the ending balance of raw materials in work in process and add any materials purchases during the month. From the given information, we can determine the following:
Total manufacturing costs incurred in April = Direct materials + Direct labor + Overhead applied
$45,000 + $17,000 + $13,600 = $75,600
Direct materials used = Total manufacturing costs incurred - Ending balance of raw materials in work in process + Beginning balance of raw materials in work in process
Direct materials used = $75,600 - $11,600 + $10,200
Direct materials used = $74,200
Since Job No. 5 is the only job still in process, the direct materials charged to Job No. 5 would be the direct materials used for the month. Therefore, the direct materials charged to Job No. 5 = $74,200 - direct materials used for all other jobs = $74,200 - ($45,000 + $22,000) = $7,200. However, the question asks for the amount of direct materials charged to Job No. 5, not the direct materials used for the month. To calculate the direct materials charged to Job No. 5, we need to apply the predetermined overhead rate of 80% to the direct labor cost of $2,000 to get $1,600 of overhead applied. Therefore, the total manufacturing costs charged to Job No. 5 = Direct materials + Direct labor + Overhead applied = $7,200 + $2,000 + $1,600 = $10,800. The amount of direct material charged to Job No. 5 is the difference between the total manufacturing costs charged to Job No. 5 and the direct labor cost charged to the job. Direct materials charged to Job No. 5 = $10,800 - $2,000 = $8,800. The correct answer is B.

Birk CoUses a Job Order Costing System