Question
Midland Inc. worked on three jobs during the month of November. Job 1 was already in process as of November 1, with total charges of
Midland Inc. worked on three jobs during the month of November. Job 1 was already in process as of November 1, with total charges of $14,000 in the beginning balance of WIP. The firm uses normal costing and applies its factory overhead to jobs based on the amount of direct labor cost used by each job. It closes its over- or under-applied manufacturing overhead to Cost of Goods Sold at the end of each month. During the month, the following transactions occurred: Charged direct materials of $2,000 to Job 1, $9,000 to Job 2, and $8,000 to Job 3. Charged direct labor of $2,000 to Job 1, $7,000 to Job 2, and $4,000 to Job 3. Applied manufacturing overhead for November to Work in Process Inventory based on the cost of direct labor used in each job. The predetermined rate was based on expected direct labor costs of $160,000 and expected overhead costs of $320,000 for the year. Incurred actual factory utility costs of $12,000, indirect materials costs of $6,000, indirect labor costs of $2,000, and factory depreciation of $10,000. Completed and transferred Job 1 and Job 2 to Finished Goods Inventory. There were no jobs in Finished Goods Inventory at the beginning of the month. Sold Job 1 for $32,000. Closed the November under-/over-applied manufacturing overhead to Cost of Goods Sold.
a)what's the ending balance in Work in Process Inventory?
b) what's the ending balance in Finished goods inventory?
c) was manufacturing overhead over or under applied for the period?
d) what is the company's gross margin after closing any over or under applied overhead to COGS?
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