Minstrel Manufacturing uses a job order costing system. During one month, Minstrel purchased $202,800 of raw materials on credit; issued materials to production of $199,000 of which $31,200 were indirect. Minstrel incurred a factory payroll of $152,400, of which $41,200 was indirect labor. Minstrel uses a predetermined overhead application rate of 150% of direct labor cost. Minstrel's beginning and ending Work in Process Inventory are $15,900 and $27,800 respectively. Compute the cost of product transferred to Finished Goods Inventory:

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Kolawole845 Kolawole845 · Answer 1 · 2020-09-18T02:31:49+02:00

Answer:

Cost of finished goods transferred $ 433,900

Explanation:

The cost of production is the sum of the direct cost plus the overhead adjusted for the work in progress.

This will be done as follows:

Direct material (199,000 - 31,200) 167,800

Direct labour (152,400 - 41,200) 111,200

Overhead ( See notes ) 166,800

Production cost 445,800

Add opening work in progress 15,900

Less closing work in progress (27,800)

Cost of finished goods transferred 433,900

Notes :

Overhead

Total overhead = (31,200 + 41,200)= 72,400

Direct labour cost = 152,400 -41,200 =111,200

Overhead absorption rate = 150%

Absorbed overhead = 150% × 111,200 = 166800