Sobus Corporation Manufactures One Product

question 161

Multiple Choice

Sobus Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold. There is no variable manufacturing overhead. The fixed manufacturing overhead standards for the company's only product specify 0.70 hours per unit at $4.00 per hour. The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $70,000 and budgeted activity of 17,500 hours. During the year, 19,700 units were started and completed. Actual fixed overhead costs for the year were $57,700.Assume that all transactions are recorded on a worksheet as shown in the text. On the left-hand side of the equals sign in the worksheet are columns for Cash, Raw Materials, Work in Process, Finished Goods, and Property, Plant, and Equipment (net) . All of the variance columns are on the right-hand-side of the equals sign along with the column for Retained Earnings.When applying fixed manufacturing overhead to production, the Work in Process inventory account will increase (decrease) by:

• A) $55,160
• B) ($26,300)
• C) $26,300
• D) ($55,160)

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Definitions:

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