Question

Minstrel Manufacturing uses a job order costing system. During one month, Minstrel purchased $202,800 of raw materials on credit; issued materials to production of $199,000 of which $31,200 were indirect. Minstrel incurred a factory payroll of $152,400, of which $41,200 was indirect labor. Minstrel uses a predetermined overhead application rate of 150% of direct labor cost. Minstrel's beginning and ending Work in Process Inventory are $15,900 and $27,800 respectively. Compute the cost of product transferred to Finished Goods Inventory:

Answer 1

Answer:

Cost of finished goods transferred   $ 433,900

Explanation:

The cost of production is the sum of the direct cost plus the overhead adjusted for the work in progress.

This will be done as follows:

Direct material  (199,000 - 31,200)                167,800

Direct labour      (152,400 - 41,200)                111,200

Overhead ( See notes )                                  166,800

Production cost                                              445,800

Add opening work in progress                      15,900

Less closing work in progress                       (27,800)

Cost of finished goods transferred               433,900

Notes :

Overhead

Total overhead = (31,200 + 41,200)= 72,400

Direct labour cost = 152,400 -41,200 =111,200

Overhead absorption rate = 150%

Absorbed overhead = 150% ×   111,200  = 166800