Question

Southern Industries uses a job order costing. The following information was drawn from the Company’s monthly accounting reports:

Job 1 Job 2 Job 3
Direct Materials $ 50 $ 60 $ 30
Direct Labor 20 30 10
Southern applies overhead at a rate of 100% of direct labor costs. By the end of the month, both Job 1 and Job 2 had been completed and sold. Job 3 was still in process. At month-end, what was the balance in the Work in Process inventory?
a. $260
b. $60
c. $40
d. $140

Answer 1

$50

Step-by-step explanation:

Given that

Direct material for Job 3= $30

Direct Labor for Job 3 = $10

The computation of balance in the Work in Process inventory is shown below:-

Balance in the Work in Process inventory = Direct Materials + Direct Labor + overhead

= $30 + $10 + (10 × 100%)

= $40 + 10

= $50

Therefore, $50 is the right answer, the option is not available in the question. So, for computing the balance in the Work in Process inventory we simply add direct material for job 3, direct labor for job 3 with overhead.