Sales Are 30% Cash and 70% on Account, and 60

question 14

Multiple Choice

$$\begin{array} { l c c c c c } & \text { January } & \text { February } & \text { March } & { \text { April } } \\\text { Sales } & \$ 26,400 & \$ 23,100 & \$ 33,000 & \$ 25,000 \\\text { Production in units } & 990 & 1,440 & 1,710 & 1,200\end{array}$$
Sales are 30% cash and 70% on account, and 60% of credit sales are collected in the month of the sale. In the month after the sale, 30% of credit sales are collected. The remainder is collected two months after the sale. It takes 4 kilograms of direct material to produce a finished unit, and direct materials cost $5 per kilogram. All direct materials purchases are on account, and are paid as follows: 40% in the month of the purchase, 50% the following month, and 10% in the second month following the purchase. Ending direct materials inventory for each month is 40% of the next month's production needs. January's beginning materials inventory is 1,080 kilograms. Suppose that both accounts receivable and accounts payable are zero at the beginning of January.
(Appendix 10A) The ending balance in accounts payable for March is:

• A) $30,120
• B) $65,832
• C) $18,072
• D) $21,168

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Definitions:

Overhead Allocation Methods

Techniques used to assign indirect costs to products, services, or departments, helping in accurately reflecting production costs.

Overhead Rate

Refers to the cost of running a business that cannot be directly attributed to a specific product or service, often expressed as a percentage of labor or material costs.

Activity-based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing more accurate product costing.

Departmental Overhead Rate

A rate used to allocate overhead costs to specific departments, based on criteria like department size, expenditure, or machine hours used.