Question

The following information applies to the questions displayed below.] McAllister, Inc. employs a normal costing system. The following information pertains to the year just ended.
Total manufacturing costs were $1,310,000.
Cost of goods manufactured was $1,275,500.
Applied manufacturing overhead was 30% of total manufacturing costs.
Manufacturing overhead was applied to production at a rate of 80 percent of direct-labor cost
Work-in-process inventory on January 1 was 75% of work-in-process inventory on December 31.
Requlred:
1. Compute the total direct-labor cost for the year.
2. Calculate the total cost of direct material used during the year
3. Compute the value of the company's work-in-process inventory on December 31.

Answer 1

Answer and Explanation:

The computation is shown below:

Given that

Total manufacturing costs = $1,310,000

Cost of goods manufactured = $1,275,500

Applied manufacturing O.H = 30% of manufacturing costs

= 0.3 of 1,310,000

= $393,000

(1)

The direct labor cost is

80% of direct labor cost = Applied overhead

So direct labor cost = $393,000 ÷  80%

= $491,250

(2) The total cost of direct material is

As we know that

Total manufacturing costs = Direct materials + Direct labor + Applied Overhead

So,

Direct materials = Total manufacturing costs - Direct labor - Applied overhead

= $1,310,000 - $491,250 - $393,000

= $425,750

(3)

The Ending work in process inventory is

As we know that

Cost of goods manufactured = Beginning work in process + Total manufacturing costs - Ending work in process

Le us s assume X to be ending work in process

Beginning work in process = X × 75% = 0.75X

Now

$1,275,500 = 0.75X + $1,310,000 - X

X = $138,000