Question

Howard Corporation has a job order costing system. The following debits (credits) appear in the firm's work in process account for the month of June: $12 000 $40 000 $30 000 June 1, Balance June 30, Direct materials June 30, Direct labour June 30, overhead applied$27 000 June 30, to finished goods($100 000) Overhead is applied at 90 per cent of direct labour cost. There is only one job still in process at the end of June, and this job has been charged with $2250 factory overhead. What was the amount of direct materials charged to that job? Select one: $2250 $9000 $2500 $4250

Answer 1

ANSWER= d) $4,250

step 1: ending balance in WIP account = $12,000 + $40,000 + $30,000 + $27,000 - $100,000 = $9,000

step 2: realize that balance in WIP account is made up of 3 components (DM, DL, MOH) thus, since only item in ending balance of WIP is Job, then

DM for Job + DL for Job + MOH for Job = ending WIP balance (1)

and recall that applied MOH = 90% x DL, thus DL = applied MOH/.9

DM for Job + $2,250/.9 + $2,250 = $9,000

DM for Job = $9,000 – $2,250/.9 – $2,250

= $9,000 – $2,500 – $2,250

= $4,250