Lock Production Co

question 158

Essay

Lock Production Co. applies factory overhead to production on the basis of direct labor costs. Assume that at the beginning of the current year the company estimated that direct material costs would be $178,800, direct labor costs would be $154,000, and factory overhead costs would be
$231,000.
(1) If the $28,000 cost of Lock's Work in Process inventory included $5,200 of direct labor cost, what amount of direct materials cost was included?
(2) If $8,100 of the company's $34,300 finished goods inventory was direct materials cost, determine the direct labor cost and factory overhead cost of the finished goods inventory.

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Definitions:

Purchasing Power Parity

An economic theory that compares different countries' currencies through a "basket of goods" approach to determine the relative value of currencies.

Price Adjustment

A change in the purchase price of a good or service in response to market factors or contractual terms.

Eurobanks

Banks that make loans and accept deposits in foreign currencies.

Foreign Currencies

Money or other forms of payment used in other countries, distinct from the domestic currency of the home country.