Question

Walter Company uses a job-order costing system to account for product costs. The following information pertains to the current year:Materials placed into production$140,000Indirect labor40,000Direct labor (10,000 hours)160,000Depreciation of factory building60,000Other plantwide overhead100,000Increase in work-in-process inventory30,000Plantwide overhead rate is $18 per direct labor hour. What is the total amount debited to Finished Goods Inventory in the current year?

Answer 1

Answer:

COGM = 450,000

Explanation:

The amount debited will be equal to the COGM which is the cost of goods manufactured.

COGM = beginnning WIP + cost added - ending WIP

we need to know the cost added during the period:

cost added during the period

materials         140,000

direct labor     160,000

overhead applied

18 x 10,000 =   180,000  

total                 480,000

Notice, for the overhead we multiply the predetermined rate by the amount of labor hours.

The actual values and adjustment for application of overhead are calculate later at year-end

Now, we are given the following information:

we know that WIP increase by 30,000

so : ending is 30,000 dollars greater than beginning

which implies ending - beginning = -30,000

we plug that into the formula:

COGM = cost added + (beginning WIP - ending WIP)

COGM = 480,000 - 30,000

COGM = 450,000