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

question 30

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.
-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 75% of direct labour cost incurred) . Newcastle Company's manufacturing overhead for January was:

• A)overapplied by £16,250.
• B)underapplied by £16,250.
• C)overapplied by £12,000.
• D)underapplied by £12,000.

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Definitions:

Ecosystem

A community of interacting organisms and their physical environment.

Community

A group of interacting living organisms sharing a populated environment.

Opportunistic

Organisms or pathogens that take advantage of certain conditions to cause disease, often seizing on weakened immune systems.

R-strategist

A term used in ecology to describe species that produce large numbers of offspring, with relatively low parental care and investment.