Sobus Corporation Manufactures One Product

question 86

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 PP&E (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:

Financing Statement

A document filed by a creditor to give public notice of a security interest in property of the debtor, used in UCC filings.

Security Interest

A legal claim or lien on collateral that secures the performance of an obligation, typically the repayment of a debt.

Attachment

A legal process by which a court of law, at the request of a creditor, designates specific property owned by the debtor to be transferred to the creditor or sold for the benefit of the creditor.

Documents Of Title

Legal documents that provide proof of ownership over goods or property, crucial in the transfer of rights from one party to another.