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Answer :
Calculation of amount of direct materials charged to job no. 173:
It is given that the work in process inventory on December 31 consisted of job no. 173 with a balance of $66,200.
Job no. 173 has been charged with manufacturing overhead costs of $20,000. Denver allocates manufacturing overhead costs at a rate of 50% of direct labor cost. It means the direct labor cost would be 20,000/50% = $40,000
Now we can calculate the amount of direct materials charged to job no. 173 as follows:
Direct material Cost = Total Cost allocated to Job – Direct Labor Cost – Manufacturing Overhead Cost
= 66200-40000-20000
= 6200
Hence, the amount of direct materials charged to job no. 173 is $6,200
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Final answer:
The Denver company's job costing system showed that job no. 173 in the work in process inventory had a balance of $66,200. Direct labor was calculated by dividing manufacturing overhead of $20,000 by 50% to arrive at $40,000. The direct materials cost, which is obtained by subtracting direct labor and manufacturing overhead from the total job cost, amounted to $6,200.
Explanation:
The Denver company's problem involves understanding their job costing system, particularly regarding job no. 173. They have a working process inventory at a balance of $66,200. The manufacturing overhead costs, which are 50% of the direct labor costs, have been charged at $20,000 for this job. To find the direct materials costs, we first need to calculate direct labor cost. Given that manufacturing overhead is 50% of direct labor, it means that direct labor costs would be $20,000 divided by 50% or $40,000. The total job cost is composed of direct labor, direct materials, and manufacturing overhead. So, to determine the direct materials charged to this job, we subtract the known costs (direct labor and manufacturing overhead) from the total job cost; $66,200 (total cost) - $40,000 (direct labor) - $20,000 (manufacturing overhead) equals $6,200. Therefore, the amount of direct materials charged to job no. 173 is $6,200.
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