Newcastle Company's Beginning and Ending Inventories for the Month of January

question 40

Multiple Choice

Newcastle Company's beginning and ending inventories for the month of January were as follows: $\begin{array}{lrr}&\text { January } 1&\text { January } 31\\ \text {Direct Materials } &£ 80,000 & £ 78,000\\ \text { Work in Process } &£ 155,000 &£ 166,000\\ \text { Finished Goods} &£ 90,000& £ 88,000\\\end{array}$

Production data for month follow: $\begin{array}{lrr} \text { Direct labour cost incurred.} &£ 215,000\\ \text { Actual manufacturing overhead cost incurred } &£ 145,000\\ \text {Direct materials purchases} &£ 160,000\end{array}$

Newcastle applies manufacturing overhead cost to jobs at the rate of 75% of direct labour cost incurred. This rate has been used for many years. The company does not close under- or overapplied manufacturing overhead to Cost of Goods Sold until the end of the year.
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The management accountant wants to apply manufacturing overhead at a rate of 75% of direct labour. The managing director wants to know how this change will affect reported profit. (Assuming Newcastle applies manufacturing overhead cost to jobs at the rate of 70% of direct labour cost incurred) . Newcastle Company's Cost of Goods Sold for January was:

• A)£512,000.
• B)£518,500.
• C)£522,000.
• D)£496,000.

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Definitions:

Trailer Lock

A security device or mechanism designed to prevent the unauthorized detachment or theft of a trailer by locking it to the towing vehicle or immobilizing its wheels.

Severe Braking

A situation where brakes are applied forcefully and suddenly, often in an emergency, to reduce vehicle speed quickly.

Brake Fade

Caused by a number of factors mostly relating to reduction in the coefficient of friction of brake friction materials. Thermal expansion of brake drums under prolonged braking tends to enlarge drum diameters, meaning that the actuation mechanisms such as slack adjusters no longer function at optimum mechanical efficiency, which makes brake fade more of a problem in drum brake systems.

Safety Pop-Off Valves

Valves designed to release pressure automatically to prevent damage or explosions in pressurized systems.