Montgomery, Inc., which uses a job-costing system, is a labor-intensive firm, with many skilled craftspeople on the

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Montgomery, Inc., which uses a job-costing system, is a labor-intensive firm, with many skilled craftspeople on the payroll. Job no. 789 was the only job in process on January 1, having costs of $22,500 as of that date. Direct materials used and direct labors incurred during January were:         

Job no. 791 was the only job in production as of January 31.         


Montgomery, Inc., which uses a job-costing system, is a labor-in


 Required:
A. Should Montgomery use direct labor or machine hours as a cost driver? Why?
B. Assume that the company decided to use direct labor as its cost driver. If the budgeted amount of direct labor and manufacturing overhead are anticipated to be $200,000 and $300,000, respectively, what is the firm's predetermined overhead rate?
C. Compute the cost of work-in-process inventory as of January 31. 
D. Compute the cost of jobs completed during January.
E. Suppose that the company sold all of its completed jobs, adding a 40% markup to cost. How much would the firm report as (1) cost of good sold and (2) sales revenue?

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Income Tax Fundamentals 2013

ISBN: 9781285586618

31st Edition

Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill

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