Recording Direct Labor and Total Conversion Costs at Samanderson, Inc.
Which of the following journal entries would be correct to record direct labor for July?
a. $1,700
b. $1,500
c. $1,300
d. $1,000
Answer:
The correct journal entry to record direct labor for July at Samanderson, Inc. is option d. $1,000.
Explanation:
In order to calculate the total conversion costs for the month of July at Samanderson, Inc., we need to consider the following:
- Materials purchased: 650 kgs at $210 = $136,500
- Units started: 3,500
- Units transferred out: 3,200
- Ending units: 300
- Ending units 55% complete in respect of conversion costs
- Direct labor charges: $1,000
- Other manufacturing costs: $600 (including electricity costs of $900)
Using the information provided, we can calculate the total conversion costs for the month of July as follows:
Equivalent units:
- Units transferred out: 3,200
- Ending work in process: 300 * 55% = 165
- Total equivalent units: 3,500
Cost per equivalent unit:
- Materials: $39 ($136,500 / 3,500)
- Conversion: $0.7429 ($2,500 / 3,365)
Cost assigned to:
- Units transferred out: $124,800 (3,200 * $39 materials, 3,200 * $0.7429 conversion)
- Ending work in process: $11,700 (300 * $39 materials, 165 * $0.7429 conversion)
Therefore, the total conversion costs for the month of July at Samanderson, Inc. is $2,500.