Question

The following information is available for completed Job No. 402: Direct materials, $120,000; direct labor, $180,000; manufacturing overhead applied, $90,000; units produced, 5,000 units; units sold, 4,000 units. The cost of the finished goods on hand from this job is:

Answer 1

Answer:

Cost of finished goods on hand = $78,000

Explanation:

Job costing is appropriate where goods or contracts are done to meet customers specific and unique requirements. Each customer's job is different from the other.

To determine cost per unit cost job, we use the formula :

= (D.material cost + Direct labour cost + Overhead)/ No of units

We can  work out the cost per unit for Job No; 402 as follows:

Step 1

Calculate the closing inventory

Closing inventory = Opening inventory + Production - Sales

= 0 + 5000 - 4000 = 1000

Step 2

Calculate the the cost per unit

= $(120,000 + 180,000 + 90,000)/ 5000 units

= $78 per unit

Step 3

Value the closing inventory

= unit cost × inventory units

= $78 × 1,000

= $78,000

Cost of finished goods on hand = $78,000