Recording Direct Labor and Total Conversion Costs at Samanderson, Inc.

10 Jan 2023

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

The correct journal entry to record direct labor for July at Samanderson, Inc. is option d. $1,000.

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.