Widman, Inc

question 38

Multiple Choice

Widman, Inc. makes and sells only one product and uses standard costing. The standard cost sheet for one unit of product includes the following:

• Direct materials: 5 grams at $0.35 per gram
• Direct labor: 1 hour at $8 per hour

Last period the company had the following results:

• 5,000 grams of direct materials purchased at $0.40 per gram
• 4,000 grams of direct materials used in production
• 900 units of product were made
• 850 hours of direct labor were used at $8.50 per hour

-The journal entry to record the incurrence of direct labor cost last period would include:

• A)Work in process $7,200, Debit; labor efficiency variance $400, Credit
• B)Work in process $7,200, Debit; labor efficiency variance $400, Debit
• C)Work in process $6,800, Debit; labor rate variance $425, Debit
• D)Work in process $6,800, Debit; labor rate variance $425, Credit

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs—direct materials, labor, and both variable and fixed overhead—as part of the cost of a finished product.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overheads - in the cost of a product.

Variable Costing Income (VCI)

An accounting method that includes only variable costs—costs that change with production level—in calculating net income.

Full Costing Income (FCI)

A method of accounting that allocates all fixed and variable costs to products, operations or projects to determine profitability.