i Cheaper manufacturing company developed the following data

i. Cheaper manufacturing company developed the following data:

Beginning work in process inventory $6000

Direct material used 360,000

Actual overhead 420,000

Overhead applied 405,000

Total manufacturing cost 960,000

Ending work in process 45,000

How much are the direct labour costs for the period?

a. $175,000

b. $195,000

c. $200,000

d. $180,000

ii. What is the production cost report used for?

a. It is an external report provided to shareholders.

b. It shows costs charged to a department and costs accounted for.

c. It shows equivalent units of production but not physical units.

d. It shows the basis on which overhead is allocated.

iii. use the following information: At January 1, 2016, Jake, Inc. has beginning inventory of 4,000 surfboards. Jake estimates it will sell 15,000 units during the first quarter of 2016, with a 10% increase in sales each quarter. Jake’s policy is to maintain an ending inventory equal to 25% of the next quarter’s sales. Each surfboard costs $200 and is sold for $250.

How many units should Jake produce during the first quarter of 2016?

a. 15,125

b. 15,0000

c. 12,500

d. 11,000

Solution

SOLUTION 1. direct materials =360000

direct labour=195000

overheads applied=405000

total manufacturing costs=960000

in cost accounting overheads applied is taken into consideration , rather than actual overheads but the difference of under or over absorbed overheads shall be adjusted.

2.answer is part 2.

because production cost report is used for internal management purposes,further overheads are not allocated on the basis of production costs because production costs already includes the element of overheads.

3.opening inventory=4000

sales=15000

closing inventory required=(15000+10%)*25%=4125

units that jake should produce=15000+4125-4000=15125