Question

In the current year, Mitchell Manufacturing expected Job No. 13 to cost $600,000 of overhead, $650,000 of materials, and $400,000 of labor. Mitchell applied overhead based on direct labor cost. Actual production required an overhead cost of $420,000, $750,000 of materials used, and $300,000 of labor. All of the goods were completed. What amount was transferred from Work-In Process to Finished Goods?A. $1,500,000. B. $1,470,000. C. $1,650,000. D. $1,670,000.

Answer 1

A. $1,500,000

Step-by-step explanation:

The overhead is applied on the basis of the direct labor cost

Overhead allocation rate = $600,000/$400,000 = 1.5 times

Materials used

$750,000

Labor cost

$300,000

Prime cost

$1,050,000

Overhead ( direct labor cost × 1.5) = $300,000 × 1.5 = $450,000

The amount of transferred finished goods from WIP is $1500,000 I.e prime (cost $1,050,000 + overhead $450,000)