Karim Corporation Uses a Standard Cost System in Which Inventories

question 119

Multiple Choice

Karim Corporation 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.The standard cost card for the company's only product is as follows: During the year, the company started and completed 31,500 units.Direct labor employees worked 23,650 hours at an average cost of $19.50 per hour.

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 recording the direct labor costs, the Work in Process inventory account will increase (decrease) by:

• A)$474,075
• B)($474,075)
• C)($461,175)
• D)$461,175

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Definitions:

Managerial Decisions

Decisions made by managers within an organization, which affect the direction and operation of the business.

Underapplied Overhead

A situation where the allocated overhead costs are less than the actual overhead costs incurred.

Cost of Goods Sold

The total cost directly associated with producing the goods that have been sold during a specific period.

Period End

The conclusion of an accounting period, at which time financial statements are prepared and financial activities are summarized.