The Lee Corporation uses a job-order costing system.The following data were recorded for June: Overhead is charged to production at 80% of direct materials cost.Jobs 235, 237, and 238 were completed during June and transferred to finished goods.Jobs 235 and 238 have been delivered to customers.Actual manufacturing overhead was equal to manufacturing overhead applied.There were no Work in Process or Finished Goods inventories at the beginning of June. Lee's Work in Process inventory balance on June 30 was:

Question

The Lee Corporation uses a job-order costing system.The following data were recorded for June:  Overhead is charged to production at 80% of direct materials cost.Jobs 235, 237, and 238 were completed during June and transferred to finished goods.Jobs 235 and 238 have been delivered to customers.Actual manufacturing overhead was equal to manufacturing overhead applied.There were no Work in Process or Finished Goods inventories at the beginning of June. Lee's Work in Process inventory balance on June 30 was:

Quizplus · Accepted Answer

To find the Work in Process (WIP) inventory balance on June 30, we need to calculate the total manufacturing cost incurred during June and subtract the cost of completed and transferred jobs.

Total manufacturing cost = Direct Materials + Direct Labor + Manufacturing Overhead Applied
Since only Overhead is given as a percentage of Direct Materials, we need to find the Direct Materials cost first.
Direct Materials cost = Total Manufacturing cost * 100 / (100 + 80) = $68,000

Direct Labor and Manufacturing Overhead Applied are given as:
Direct Labor = $18,000
Manufacturing Overhead Applied = $54,000 (80% of Direct Materials)

Total Manufacturing cost = $68,000 + $18,000 + $54,000 = $140,000

Cost of completed and transferred jobs:
Job 235 = $27,500
Job 237 = $58,000
Job 238 = $42,560

Total cost of completed and transferred jobs = $27,500 + $58,000 + $42,560 = $128,060

WIP inventory balance on June 30 = Total manufacturing cost - Cost of completed and transferred jobs
= $140,000 - $128,060 = $11,940

Therefore, the correct answer is B) $3,940.

The Lee Corporation Uses a Job-Order Costing System