Question

Mary's Landscaping uses a job order cost system. The following debits (credits) appeared in Work-in-Process Inventory for August: DescriptionAmount August 1Balance$12,500 For the monthDirect materials 81,000 For the monthDirect labor 54,000 For the monthFactory overhead 43,200 For the monthTo finished goods (162,000) Mary's applies overhead to production at a predetermined rate of 80 percent based on direct labor cost. Job 3318, which was started during August and is the only job still in process at the end of August, has been charged direct labor of $3,375. Required: What cost amount of direct materials was charged to Job 3318

Answer 1

Answer:

Direct material charged to Job 3318 = $22,625

Explanation:

First of all, add all the cost incurred to date which is $190,700 (Opening WIP $12,500+Direct material $81,000 +Direct labour $54000 +Factory Overhead $43,200). Then deduct the cost of finished goods in order to determine the total cost of Job 3318 as this is the only job which is not finished yet i.e in process.

Therefore, the total cost of job 3318 = $190,700 - $162,000 (Finished goods cost)

Total cost of job 3318 = $28,700

Now we know the direct labour cost of this job which is $3,375 and we also know that overhead cost is 80% of direct labour cost which would be  $2,700 ($3,375*80%). So, direct material cost will be $22,625 ($28700- $3,375 - $2,700).