Problem $8-71($Static$)$ Choosing Between Job Costing and Process

Costing $($LO $8-7)$

Saratoga Systems produces a single product. The production process requires all

material to be brought to the shop floor before any work begins. The material is then

processed and assembled and then transferred to finished goods inventory. Every unit

is completely identical in specification and use, and no customization is possible.

Because of the cost of the product, only a few units are produced in any one month.

During June, only three units were started, and these were labelled ID$061,$ ID$062,$ and

ID$063.$ There was no beginning inventory of any kind on June $1.$ Records from the raw

material store and employee time records show the following requisitions and direct

labor costs:

The difference in the material cost represents the historical cost of material purchased

at different times. The difference in labor cost represents the difference in seniority

$($not skill$)$ of the individual employees.

Overhead for the month of June totaled $$63,000.$

During March, ID$061$ and ID$062$ were completed and transferred to finished goods.

ID$063$ was still in process on June $30.$

Required:

a$.$ Suppose Saratoga Systems uses a job cost system and applies overhead to

products based on direct labor cost. What will be the cost of the units transferred to

finished goods? What will be the amount in Work$-$in$-$Process Ending Inventory?

b$.$ Suppose Saratoga Systems uses process costing and ID$063$ was $25$ percent

complete with respect to conversion cost $($direct labor and overhead cost$).$ Assume

that direct materials cost is not traced to individual units. What will be the cost of

the units transferred to finished goods? What will be the amount in Work$-$in$-$Process

Ending Inventory?

c$.$ Based on the provided information, does process costing appear to be sufficient?