Redwoods Company designs and builds exotic furniture for individual customers. On March 1, there were two jobs in process: Job 400 with a beginning balance of $23,000 and Job 402 with a beginning balance of $6,000. Overhead costs are applied by using a rate of 50% of direct labor costs. Both jobs are unfinished on March 31. Data on March costs for both the jobs are as follows:

Job 400 Job 402
Direct materials $6,000 $ 10,000
Direct labor cost 4,000 13,000

What is the total amount of the work-in-process account on March 31?
a. $70,500
b. $45,000
c. $58,490
d. $38,00
e. None of these choices are correct.

Question

Redwoods Company designs and builds exotic furniture for individual customers. On March 1, there were two jobs in process: Job 400 with a beginning balance of $23,000 and Job 402 with a beginning balance of $6,000. Overhead costs are applied by using a rate of 50% of direct labor costs. Both jobs are unfinished on March 31. Data on March costs for both the jobs are as follows:

Job 400	Job 402
Direct materials	$6,000	$ 10,000
Direct labor cost	4,000	13,000

What is the total amount of the work-in-process account on March 31?
a. $70,500
b. $45,000
c. $58,490
d. $38,00
e. None of these choices are correct.

BlackTom AI · Accepted Answer

First, restating the problem in my own words: Redwoods Company has two jobs in process on March 1, Job 400 with a beginning WIP balance of 23,000 and Job 402 with 6,000. Overhead is applied at 50% of direct labor. For March, the costs recorded are:
- Job 400: Direct materials 6,000; Direct labor 4,000
- Job 402: Direct materials 10,000; Direct labor 13,000
Both jobs are unfinished on March 31, so these March costs must be added to their beginning balances, along with overhead applied to each job.

Option analysis, step by step:
Option a: $70,500
- Compute overhead for each job: Job 400 overhead = 50% of 4,000 = 2,000; Job 402 overhead = 50% of 13,000 = 6,500.
- Compute total current costs added in March: Job 400 = 6,000 (materials) + 4,000 (labor) + 2,000 (overhead) = 12,000; Job 402 = 10,000 (materials) + 13,000 (labor) + 6,500 (overhead) = 29,500.
- Add beginning WIP: Job 400 total = 23,000 + 12,000 = 35,000; Job 402 total = 6,000 + 29,500 = 35,500.
- Combined WIP on March 31 = 35,000 + 35,500 = 70,500.
This option matches the straightforward addition if one uses the full March costs and beginning balances. However, it assumes no other adjustments exist.

Option b: $45,000
- This would require a much smaller addition to either or both jobs, or a miscalculation of overhead or beginning balances. For example, if overhead were calculated differently or some beginning balances were excluded, you could land around 45,000, but with the given data, this value does not align with the direct computation above.

Option c: $58,490
- This would imply a specific combination of beginning balances and March costs that does not line up with the provided numbers. If you try to mix the numbers in a non-stepwise way (e.g., misapplying overhead or omitting a portion of materials or labor), you could approach this figure, but the exact arithmetic from the data given does not yield 58,490.

Option d: $38,00
- This appears to be a misprint or an incomplete figure (perhaps $38,000). Even if interpreted as $38,000, it would require subtracting a substantial amount from the calculated totals, which would not be consistent with the data (beginning balances plus fully calculated current costs). The computed WIP clearly exceeds this value when using the provided costs.

Option e: None of these choices are correct
- Given the computations above, the total WIP on March 31, based on beginning balances and March costs with overhead, sums to 70,500. If 70,500 is indeed the correct computed total, then option a would be correct; if the intended correct total differs due to interpretation or a trap in the question, then none of the listed options would be correct. In this analysis, using the standard costing method with the stated data yields 70,500 for the combined WIP, which aligns with option a (assuming no misprints or hidden adjustments).

Summary note: The core calculation steps are to add beginning WIP for each job to the March costs for that job, with overhead applied at 50% of direct labor, and then sum the two jobs. The computed totals are Job 400: 35,000 and Job 402: 35,500, giving a combined WIP of 70,500. The given option set includes a, which corresponds to this value, though a careful reader should verify the exact problem formatting to ensure no misprints or alternative interpretations are intended.

MGT5_WI25_A00 Chapter 4 Knowledge check

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