Mangrum Corporation Manufactures One Product

question 138

Multiple Choice

Mangrum 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. Information concerning the direct labor standards for the company's only product is as follows:
During the year, the company assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 12,790 hours at an average cost of $19.50 per hour. The company calculated the following direct labor variances for the year:
Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation.

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

• A) ($249,405)
• B) $249,405
• C) ($281,435)
• D) $281,435

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Definitions:

Regular Price

The standard or usual cost of an item or service without any discounts, promotions, or special offers applied.

Operating Expenses

Definition: Costs associated with the day-to-day operations of a business, excluding cost of goods sold.

Sears

A former major American chain of department stores known for selling a wide range of products, from clothing to appliances.

Breakeven Price

The amount of money for which selling a product or service neither results in a profit nor a loss.