Summit Company Has Provided the Following Inventory Balances and Manufacturing

question 20

Multiple Choice

Summit Company has provided the following inventory balances and manufacturing cost data for the month of January:
$\begin{array}{|l|r|r|}\hline \text { Inventories: } & \text { January 1 } & \text { January 31 } \\\hline \text { Direct materials } & \$ 30,000 & \$ 40,000 \\\hline \text { Work in process } & 15,000 & 20,000 \\\hline \text { Finished goods } & 65,000 & 50,000 \\\hline\end{array}$
$\begin{array} { | l | r | } \hline & \text { Month of January } \\\hline \text { Cost of goods manufactured } & \$ 515,000 \\\hline \text { Manufacturing overhead applied } & 150,000 \\\hline \text { Direct materials used } & 190,000 \\\hline \text { Actual manufacturing overhead } & 144,000 \\\hline\end{array}$ Under Summit's job-order costing system, any over- or underapplied overhead is closed out to the Cost of Goods Sold account at the end of the calendar year (that is, December 31) .

-What was the total amount of direct material purchases during January?

• A) $180,000.
• B) $190,000.
• C) $195,000.
• D) $200,000.

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Definitions:

Consumer Surplus

The contrast between the total payment consumers are willing and financially able to make for a good or service and the amount they truly pay.

Producer Surplus

The discrepancy between the price producers agree to sell a good for and the price they actually end up receiving.

Economic Efficiency

A condition in which resources are allocated in the most effective way possible, maximizing outputs from given inputs without waste.

Allocative Efficiency

A state of resource allocation where goods and services are distributed according to consumer preferences, reflecting an optimal distribution of resources.