Question

Martinez Aerospace Company uses a job-order costing system. The direct materials for Job #045391 were purchased in July and put into production in August. The job was not completed by the end of August. At the end of August, in what account would the direct material cost assigned to Job #045391 be located?

Answer 1

Answer with Explanation:

All the direct expenses are formed part of the Work In Progress.

The entry would be:

Dr Work In Process Account Job#045391 XX

Cr            Direct Material Inventory  Job#045391 XX

The reason is that the direct expenses are always charged to product under process and once the work in process is converted into finished goods then the sale of the good is recorded with cash to sales and cost of goods sold to Finished godds. These two double entries are as under:

Recording of sale:

Dr Trade Receivables XX

Cr        Sales                         XX

Recording of finished goods dispatched (inventory sold):

Dr Cost of goods sold XX

Cr           Finished Goods Job#045391 XX