Qns 5.

3 (LaSalle Ltd pg 178)

Hi Michelle, after reading through question 5.3, the below points can be concluded. Please read through the question until you can understand how all of these points are obtained. This is very important for your own understanding, okay? =]

Job #214 opens in the month of Aug with an opening work-in-process (WIP) amount of $13,400.

Job #215 opens in the month of Aug with an opening WIP amount of $9,670.

Overheads is applied at a rate of $16 per direct labour hour (DLH)

Direct labour is applied at a rate $10 per hour.

Jobs #216 and #217 were freshly started during the month of Aug.

Job #214 was completed on 22 Aug. Selling price was base cost + markup of 30%. (English: 130% of base cost)

All other jobs (#215, #216, #217) still remained at work in process at end Aug.

Cheeli will not refuse any of Michelles request/s.

Universal rule in MAB: Cost of any job = Opening WIP (if any) + Direct Materials + Direct Labour + Overheads

*WIP = Work-in-process

1) Overheads is applied at a rate of $16 per direct labour hour (DLH)

Therefore:

Overheads applied (job #214) = $16 * 1,800 Direct labour hours = $28,800

Overheads applied (job #215) = $16 * 4,000 Direct labour hours = $64,000

Overheads applied (job #216) = $16 * 150 Direct labour hours

= $2,400

Overheads applied (job #217) = $16 * 800 Direct labour hours = $12,800

2) Universal rule in MAB: Cost of any job = Opening WIP (if any) + Direct Materials + Direct Labour + Overheads

*Note: See textbk pg 161 for examples of Job-order cost sheet

LaSalle Ltd Job #214 ________Job-order cost sheet as of end Aug________ $ Add : Opening WIP Direct Materials Direct Labour (1,800 DLH * $10) Applied overheads (1,800 DLH * $16) 13,400 2,200 18,000 28,800

Total cost

62,400

LaSalle Ltd Job #215 ________Job-order cost sheet as of end Aug________

$ Add : Opening WIP Direct Materials Direct Labour (4,000 DLH * $10) Applied overheads (4,000 DLH * $16) 9,670 9,000 40,000 64,000

Total cost

122,670

LaSalle Ltd Job #216 ________Job-order cost sheet as of end Aug________ $ Direct Materials Direct Labour (150 DLH * $10) Applied overheads (150 DLH * $16) 1,500 1,500 2,400

Total cost

5,400

LaSalle Ltd Job #217 ________Job-order cost sheet as of end Aug________ $ Direct Materials Direct Labour (800 DLH * $10) Applied overheads (800 DLH * $16) 3,450 8,000 12,800

Total cost

24,250

3) Michelle, just to clarify to you, question 3 is just asking you for the sum of all closing work-in-process (WIP) amount for all jobs at the end of Aug (31 Aug).

WIP refers to any job that is not yet completed.

Job #214 has already been completed at 22 Aug, so there is no need to add Job #214 as theres no WIP.

Job #215 opens in the month of Aug with an opening WIP amount of $9,670.

Direct labour is applied at a rate $10 per hour.

Overheads is applied at a rate of $16 per direct labour hour (DLH)

English: Find the closing WIP for Jobs #215, #216, #217.

Universal rule in MAB: Cost of any job = Opening WIP (if any) + Direct Materials + Direct Labour + Overheads

We begin by finding each individual jobs closing WIP, then adding the 3 together to get the total closing WIP.

WIP (Job #215) = Opening WIP + Direct Materials + Direct Labour + Overheads = $9,670 + $9,000 + (4,000 DLH * $10) + (4,000 DLH * $16) = $122, 670

WIP (Job #216) = Direct Materials + Direct Labour + Overheads = $1,500 + (150 DLH * $10) + (150 DLH * $16) = $5,400

WIP (Job #217) = Direct Materials + Direct Labour + Overheads = $3,450 + (800 DLH * $10) + (800 DLH * $16) = $24,250

Total closing WIP for 31 Aug = $122,670 + $5,400 + $24,250 = $152,320

*Note: Notice the answers were the same for part 2?

4) Qns 4 is asking you for the price of job #214; therefore, it is referring to its selling price.

As you noted earlier, job #214 was sold at base cost + 30%.

From part 2, we can see from the Job-order cost sheet that base cost for job #214 was $62,400.

Therefore:

Selling price of job #214 = (130/100) * $62,400 = $81,120

5) Yes, LaSalle Ltd should have a finished goods account.

Job #214 would be added to this account.