Question

Stutz Inc. designs and builds basketball gymnasiums. Each gymnasium is customized to suit individual customers' specifications. Stutz uses job-order costing to keep track of its costs. In February, it worked on three jobs. Data for these jobs are as follows: Line Item Description Job 175 Job 178 Job 179 Balance, February 1 $13,790 $ 0 $0 Direct materials $16,200 $8,500 $30,500 Direct labor cost $23,300 $7,600 $45,000 Machine hours 400 hrs. 300 hrs. 2,000 hrs. Overhead is applied to jobs at the rate of $25 per machine hour. By February 28, Job 178 is the only one unfinished. The balance of Finished Goods on February 1 is $94,000 (consisting of Job 177). Jobs 177 and 179 are sold during February. Stutz sells its product at cost plus 40%. Calculate the balance of Finished Goods on February 28. a. $63,290 b. $39,500 c. $49,500 d. $53,290

Answer 1

To calculate the balance of Finished Goods on February 28, add the total costs and overhead costs for each job and deduct the costs of sold jobs from the balance on February 1.

Step-by-step explanation:

To calculate the balance of Finished Goods on February 28, we need to consider the direct materials, direct labor cost, and machine hours for each job. For Job 175, the total cost is $39,300 ($16,200 + $23,300). For Job 178, the total cost is $16,100 ($8,500 + $7,600). For Job 179, the total cost is $75,500 ($30,500 + $45,000).

To calculate the overhead costs for each job, we need to multiply the machine hours by the overhead rate of $25 per machine hour. For Job 175, the overhead cost is $10,000 (400 hours x $25). For Job 178, the overhead cost is $7,500 (300 hours x $25). For Job 179, the overhead cost is $50,000 (2,000 hours x $25).

Adding the total costs and overhead costs together, we get the following balances for each job: Job 175 - $49,300, Job 178 - $23,600, and Job 179 - $125,500. Since Jobs 177 and 179 were sold during February, their costs should be deducted from the balance of Finished Goods on February 1. Therefore, the balance of Finished Goods on February 28 is $63,290 (Balance on February 1 - Job 177's cost - Job 179's cost).