Chaffey Inc Manufacturing Overhead for the Month Was Underapplied by $7,000

question 15

Multiple Choice

Chaffey Inc.has provided the following data for the month of January.There were no beginning inventories;consequently,the direct materials,direct labor,and manufacturing overhead applied listed below are all for the current month. $\begin{array}{lrrrr}&\text {Work In}&\text { Finished }&\text {Cost of }\\&\text {Process}&\text { Goods}&\text { Goods Sold}&\text { Total}\\\text {Direct materials.............}&\$ 3,140 & \$ 18.00 & \$ 100,080 & \$ 121,220 \\\text {Direct labor...................}&1,310 & 15,00& 83,400 & 99,710 \\\text {Manufacturing overhead}&\\\text { applied..........................}&\underline{1,680} & \underline{8,400}& \underline{45,920} & \underline{56,000} \\\text {Total.............................}&\underline{ \$ 6,130} & \underline{ \$ 41,400} & \underline{ \$ 229,400} & \underline{\$ 276,930}\end{array}$ Manufacturing overhead for the month was underapplied by $7,000. The company allocates any underapplied or overapplied overhead among work in process,finished goods,and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts.
The work in process inventory at the end of January after allocation of any underapplied or overapplied overhead for the month is closest to:

• A)$5,975
• B)$6,340
• C)$5,920
• D)$6,285

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Definitions:

WACC

The Weighted Average Cost of Capital is determined by calculating a firm's capital cost, with proportional weights assigned to each category of capital.

NPV

Net Present Value, a calculation used to assess the profitability of an investment by discounting future cash flows to their present value.

Cash Flow

The total amount of money being transferred into and out of a business, affecting the company's liquidity, operations, and financial health.

NPV

Net Present Value; a method used in capital budgeting to evaluate the profitability of an investment or project.