Mallet Company Has Only Job 844 in Process on March $\begin{array}{|l|r|}\hline \text { Purchased during the month } & \$ 29,500 \\\hline \text { Used in production } & \$ 30,500 \\\hline\end{array}$

question 67

Multiple Choice

Mallet Company has only Job 844 in process on March 1 of the current year. The job has been charged with $2,000 of direct material cost, $2,500 of direct labour cost, and $1,750 of manufacturing overhead cost. The company assigns overhead cost to jobs at a predetermined rate of 70% of direct labour cost. Any under- or overapplied overhead cost is closed out to Cost of Goods Sold at the end of the month.

During March, the following activity and amounts were recorded by the company:

Raw materials (all direct materials) :
$\begin{array}{|l|r|}\hline \text { Purchased during the month } & \$ 29,500 \\\hline \text { Used in production } & \$ 30,500 \\\hline\end{array}$
Labour:
$\begin{array}{|l|r|}\hline \begin{array}{l}\text { Direct labour hours worked during the } \\\text { month }\end{array} & 2,500 \\\hline \text { Direct labour cost incurred } & \$ 26,500 \\\hline \text { Indirect labour costs incurred } & \$ 5,500 \\\hline \begin{array}{l}\text { Manufacturing overhead costs incurred } \\\text { (total) }\end{array} & \$ 18,500 \\\hline\end{array}$
Inventories:
$\begin{array}{|l|r|}\hline \text { Raw materials (all direct) March 31 } & \$ 7,500 \\\hline \text { Work in process, March 31 } & \$ 14,500 \\\hline\end{array}$
Work in Process inventory contains $\$ 5,500$ of direct labour cost.


-What is the amount of direct materials cost in the March 31 work in process inventory account?

• A) $5,150.
• B) $9,350.
• C) $9,000.
• D) $3,850.

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Definitions:

Standard Costs

Predetermined or estimated costs for a product or service, used for budgeting purposes and as a benchmark for measuring performance.

Materials Price Variance

A measure of the difference between the actual cost of materials and the expected cost, based on the standard price.

Direct Labor-hours

The total hours worked by employees directly involved in the manufacturing process, often used as a basis for allocating overhead costs in traditional costing systems.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity, helping companies to better plan for and manage expenses related to changes in production or sales.