Mason, Inc

question 8

Multiple Choice

Mason, Inc. uses a standard costing system. Overhead costs are allocated based on direct labour hours. The standard variable overhead and fixed overhead rates are $1 and $5 per direct labour hour, respectively. Data relevant for the current period include: Direct materials purchased 50,000 kg. @ $12 per kg.
Direct materials used 50,000 kg.
Standard quantity of direct materials
For actual production 45,000 kg.
Direct materials standard price $13 per kg.
Direct labour costs incurred 75,000 hours @ $12 per hour
Standard direct labour hours for
Actual production 78,000 hours
Standard direct labour cost per hour $11 per hour
Variable overhead costs incurred $77,070
Fixed overhead costs incurred $381,920
The purchase of direct materials would be recorded in direct materials inventory at:

• A)$540,000
• B)$585,000
• C)$600,000
• D)$650,000

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Definitions:

Net Income

The total profit or loss of a business after all expenses, including taxes and operating costs, have been deducted from revenues.

Prepaid Expenses

Costs paid in advance for goods or services to be received in the future, treated as assets on the balance sheet.

Accounts Receivable

Sums due to a company from its clients for products or services that have been supplied or utilized but remain unpaid.

Net Income

The residual income of a company after total revenue has been diminished by all costs and taxes.