Compute the cost of the company’s year-end work-in-process inventory. Garcia, Incorporated, uses a job-order costing system for its products, which pass from the Machining Department, to theAssembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, theAssembly Department performs a number of manual-assembly activities. The company applies manufacturing overheadusing machine hours in the Machining Department and direct-labor cost in the Assembly Department. The followinginformation relates to the year just ended:ItemsBudgeted manufacturing overheadActual manufacturing overheadBudgeted direct-labor cost (based on practical capacity)Actual direct-labor costBudgeted machine hours (based on practical capacity)Actual machine hoursThe data that follow pertain to job number 775, the only job in production at year-end.AssemblyDepartment$ 6,700$58,500150MachiningDepartment$ 25,500$ 27,800370Selling and administrative expense amounted to $2,500,000.MachiningDepartment$ 4,000,0004,280,0001,500,0001,450,000ItemsDirect materialDirect laborMachine hours400,000425,000AssemblyDepartment$ 3,080,0003,040,0005,600,0005,780,000100,000110,000

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Compute the cost of the company’s year-end work-in-process inventory.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question

Compute the cost of the company’s year-end work-in-process inventory.

Garcia, Incorporated, uses a job-order costing system for its products, which pass from the Machining Department, to the
Assembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, the
Assembly Department performs a number of manual-assembly activities. The company applies manufacturing overhead
using machine hours in the Machining Department and direct-labor cost in the Assembly Department. The following
information relates to the year just ended:
Items
Budgeted manufacturing overhead
Actual manufacturing overhead
Budgeted direct-labor cost (based on practical capacity)
Actual direct-labor cost
Budgeted machine hours (based on practical capacity)
Actual machine hours
The data that follow pertain to job number 775, the only job in production at year-end.
Assembly
Department
$ 6,700
$58,500
150
Machining
Department
$ 25,500
$ 27,800
370
Selling and administrative expense amounted to $2,500,000.
Machining
Department
$ 4,000,000
4,280,000
1,500,000
1,450,000
Items
Direct material
Direct labor
Machine hours
400,000
425,000
Assembly
Department
$ 3,080,000
3,040,000
5,600,000
5,780,000
100,000
110,000

Expert Solution

Step 1: Explanation of Predetermined Overhead Rates

Predetermined Overhead Rates are set in advance to allocate indirect manufacturing costs, such as utilities and maintenance, to products based on estimated activity levels, helping determine product costs.

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