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Company produces pipes for​ concert-quality organs. Each job is unique. In April 2021, it completed all outstanding​ orders, and​ then, in May 2021​, it worked on only two​ jobs, M1 and​ M2:Rafael Company, May 2021 Job M1 Job M2Direct materials $79,000 $56,000Direct manufacturing labour $277,000 $205,000Direct manufacturing labour is paid at the rate of $25 per hour. Manufacturing overhead costs are allocated at a budgeted rate of $16 per direct manufacturing​ labour-hour. Only Job M1 was completed in May. What is the ending balance in the​ Work-in-Process Control​ account?

Question

Company produces pipes for​ concert-quality organs. Each job is unique. In April 2021, it completed all outstanding​ orders, and​ then, in May 2021​, it worked on only two​ jobs, M1 and​ M2:Rafael Company, May 2021 Job M1 Job M2Direct materials 79,00079,000 56,000Direct manufacturing labour 277,000277,000 205,000Direct manufacturing labour is paid at the rate of 25perhour.Manufacturingoverheadcostsareallocatedatabudgetedrateof25 per hour. Manufacturing overhead costs are allocated at a budgeted rate of 16 per direct manufacturing​ labour-hour. Only Job M1 was completed in May. What is the ending balance in the​ Work-in-Process Control​ account?

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Solution

To calculate the ending balance in the Work-in-Process Control account, we need to add up all the costs associated with the jobs that are still in process at the end of the period. In this case, only Job M2 is still in process at the end of May 2021.

First, we need to calculate the manufacturing overhead for Job M2. We know that the direct manufacturing labour cost for Job M2 is 205,000andthattheworkersarepaid205,000 and that the workers are paid 25 per hour. Therefore, the number of labour hours for Job M2 is 205,000/205,000 / 25 = 8,200 hours. The manufacturing overhead for Job M2 is then 8,200 hours * 16/hour=16/hour = 131,200.

Next, we add up all the costs for Job M2:

Direct materials: 56,000Directmanufacturinglabour:56,000 Direct manufacturing labour: 205,000 Manufacturing overhead: $131,200

So, the ending balance in the Work-in-Process Control account is 56,000+56,000 + 205,000 + 131,200=131,200 = 392,200.

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