Question

Assume that a company uses direct labor dollars as the allocation base to compute its predetermined plantwide overhead rate of 140%. Also, assume the following information from the company's schedule of cost of goods manufactured, schedule of cost of goods sold, and its income statement: Direct labor Cost of goods manufactured $ 65,000 Actual manufacturing overhead $260,000 Selling and administrative expense $84,000 $85,000 If the beginning work-in-process inventory was $10,000, the ending work in process inventory was $5,000, and finished goods inventory decreased by $4,000 during the period, then what is the direct materials used in production? Multiple Choice $89.000 $106.000 599.000 c $109.000

Answer 1

1. 99,000

Cost of Goods Sold	$     260,000
Opening WIP	$     (10,000)
Closing WIP	$          5,000
Less - Labour Cost	-65000
Less - Overhead Allocated	-91000
Raw material	$        99,000

2. d. If the company closes its underapplied overhead entirely to Cost of Goods sold it will cause net operating income to be lower than the net income reported if the company had closed its underapplied overhead proportionally to WIP, Finished goods and Cost of goods sold

3.   $ 3,44,400

Cost of Goods Manufactured	$        260,000
Less - Overapplied overhead	$          (7,000)
Opening Finished Goods	$          10,000
Closing Finished Goods	$          (2,000)
Cost of Goods Sold	$        261,000
Selling Cost	$          75,400
Total Cost	$        336,400
Profit	$            8,000
Sales	$        344,400

4. a. The entry to dispose of the underapplied cost will include debit to Finished goods for $ 1,200 (40,000/4,00,000 * 12,000)