Gerald Eiche Company Uses a Job-Order Costing System and Has

question 63

Multiple Choice

Gerald Eiche Company uses a job-order costing system and has the following data available:
$\begin{array}{ll}\text { Beginning Direct Materials Inventory } & \$ 26,000 \\\text { Beginning Work-In-Process Inventory } & \$ 64,000 \\\text { Beginning Finished Goods Inventory } & \$ 58,000\\ \text {Direct materials purchased on account }&\$148,000 \\ \text { Direct materials requisitioned}&\$82,000 \\ \text {Direct labor cost incurred }&\$130,000 \\ \text {Factory overhead incurred }&\$ 146,000\\ \text {Cost of goods completed }&\$292,000 \\ \text {Cost of Goods Sold }&\$ 260,000\\ \text { Overhead application rate (based on direct labor cost) }&125\%\\\end{array}$
The journal entry to record the cost of goods sold would include a ________.

• A) Debit to Finished Goods Inventory for $292,000
• B) Credit to Finished Goods Inventory for $260,000
• C) Credit to Work-In-Process Inventory for $260,000
• D) Credit to Cost of Goods Sold for $292,000

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Definitions:

Variable Cost

Costs that change in proportion to the level of activity or volume of production in a business.

Fixed Costs

Costs that do not vary with the level of output or sales, such as rent, salaries, and insurance expenses.

Depreciation

Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life.

Contribution Margin

The amount by which sales revenue exceeds variable costs, used to cover fixed costs and generate profit.