Petters Inc. has provided the following data for the month of November. There we
ID: 2498230 • Letter: P
Question
Petters Inc. has provided the following data for the month of November. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.
Work In Process Finished Goods Cost of Goods Sold Total
Direct Materials $1,960 $14,300 $99,220 $115,480
Direct Labor 2,580 21,450 148,830 172,860
MOH applied 2,180 13,080 93,740 109,000
Total $6,720 48,830 341,790 397,340
Manufacturing overhead for the month was overapplied by $10,000.
The company allocates any underapplied or overapplied manufacturing 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 November after allocation of any underapplied or overapplied manufacturing overhead for the month is closest to:
$6,520
$6,889
$6,551
$6,920
Explanation / Answer
Petters Inc.
Valuation of Work In Process
Direct Materials $1,960
Direct Labor $2,580
MOH applied $2,180
Total $6,720
Manufacturing overhead for the month was overapplied by $10,000.
Any Over application of Overheads is the amount that the estimated overhead exceeds the actual overhead incurred for a production period.
Since the Costs should be recorded at actuals the Over applied Overheads are to be deducted from the respective accounts.
In case of Work in Progress account the Over applied Manufacturing OH = 10,000 X 2,180 / 109,000
= 200
The Balance in work in process inventory at the end of November after allocation of overapplied manufacturing OH = 6,720 - 200 = 6,520
Answer is Option A = 6,520
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