Deck 3: Product Costing and Cost Accumulation in a Batch Production Environment

Question 1

The two-stage cost allocation actually has three types of allocation involved.

Answer 1

True

Question 2

The final step in recognizing the completion of production requires a company to debit Finished- Goods Inventory and credit Work-in-Process Inventory.

Answer 2

True

Question 3

In traditional product-costing systems, the measure of productive activity is usually some volume- based cost driver, like direct-labor hours.

Answer 3

True

Question 4

The term "normal costing" refers to the use of job-costing systems.

Question 5

Product costing in a manufacturing firm is the process of:

A)accumulating the company's period costs.
B)allocating costs among the firm's departments.
C)placing a value on the company's fixed assets.
D)assigning costs to the firm's inventory.
E)assigning costs to the company's managers.

Question 6

Which of the following statements is true?

A)Service firms have little need for determining the cost of their services.
B)The concept of product costing is relevant only for manufacturing firms.
C)The cost of year-end inventory appears on the balance sheet as an expense.
D)Service companies use cost information for planning and control purposes.
E)Mining and petroleum companies have no inventoriable costs.

Question 7

Nonmanufacturing firms typically refer to their service production processes as jobs.

Question 8

Job-order costing methods are used in a variety of service industry firms and nonprofit organizations.

Question 9

A production order for a job authorizes the release of material to production.

Question 10

A predetermined overhead rate is calculated by dividing actual overhead cost by the actual amount of a cost driver used in the process.

Question 11

Product or service cost is a very objective number that anyone could agree on.

Question 12

Two-stage cost allocation uses a first stage to assign all product costs to production departments and then a second stage to apply different cost drivers to improve efficiency.

Question 13

Electricity costs that were incurred by a company's production processes should be debited to Utilities Expense.

Question 14

Manufacturing overhead is a pool of indirect production costs that must somehow be attached to each unit manufactured.

Question 15

In a public accounting firm, for example, costs are assigned to an audit engagement in much the same way they are assigned to a single batch of tables by a furniture manufacturer.

Question 16

Actual costing avoids the profitability of cyclicality.

Question 17

Which of the following statements is true?

A)Product costing is not used in financial accounting.
B)There is only one way to assign indirect costs.
C)All product cost numbers can be easily derived due to their objective nature.
D)Product costing is limited to manufacturing firms.
E)Relative profitability depends upon the way we assign costs and define outputs as

Question 18

Under- or overapplied manufacturing overhead at year-end is most commonly charged or credited to Work-in-Process Inventory.

Question 19

As soon as products are completed, their product costs are transferred from Raw Materials Inventory to Finished-Goods Inventory.

Question 20

Product costs provide crucial data for a variety of managerial purposes.

Question 21

Which of the following statements regarding work in process is not correct?

A)Work in process is partially completed inventory.
B)Work in process consists of direct labor, direct material, and manufacturing overhead.
C)Work-in-Process Inventory is debited to record direct material used and direct labor
D)Work-in-Process Inventory appears on the year-end balance sheet.
E)Work-in-Process Inventory is credited when goods are sold.

Question 22

The assignment of direct labor cost to individual jobs is based on:

A)an estimate of the total time spent on the job.
B)actual total payroll cost divided equally among all jobs in process.
C)estimated total payroll cost divided equally among all jobs in process.
D)the actual time spent on each job multiplied by the wage rate.
E)the estimated time spent on each job multiplied by the wage rate.

Question 23

A typical job-cost record would provide information about all of the following items related to an order except:

A)the cost of direct materials used.
B)administrative costs.
C)direct labor costs incurred.
D)applied manufacturing overhead.
E)direct labor hours worked.

Question 24

Morgan Manufacturing recently sold goods that cost $35,000 for $45,000 cash.The journal entries to record this transaction would include:

A)a credit to Work-in-Process Inventory for $35,000.
B)a debit to Sales Revenue for $45,000.
C)a credit to Profit on Sale for $10,000.
D)a debit to Finished-Goods Inventory for $35,000.
E)a credit to Sales Revenue for $45,000.

Question 25

Which of the following statements about manufacturing cost flows is false?

A)Direct materials, direct labor, and manufacturing overhead are entered in the Work-in-
B)The Finished-Goods Inventory account will contain entries that reflect the cost of goods
C)The cost of units sold during the period will typically appear on the income statement.
D)When a company sells goods that cost $54,000 for $60,000, the firm will enter $6,000 in
E)Units are normally transferred from Work-in-Process Inventory to Finished-Goods

Question 26

The controller for Jack's Rabbits, Inc., estimates that the company's fixed overhead is $150,000 per year.He also has determined that the variable overhead is approximately $0.20 per rabbit raised and sold.Since the company has a single product, overhead is applied on the basis of output units, or in other words, rabbits raised and sold. What is the predetermined overhead rate per rabbit if the output estimate or prediction is 150,000 rabbits?

A)$1.00
B)$0.20
C)$1.20
D)$3.00
E)$7.50

Question 27

Which of the following types of companies would most likely use process costing?

A)Aircraft manufacturers.
B)Textile manufacturers.
C)Textbook publishers.
D)Custom-machining firms.
E)Shipbuilders.

Question 28

If a company sells goods that cost $80,000 for $92,000, the firm will:

A)reduce Finished-Goods Inventory by $80,000.
B)reduce Finished-Goods Inventory by $92,000.
C)report sales revenue on the balance sheet of $92,000.
D)reduce Cost of Goods Sold by $80,000.
E)follow more than one of the other procedures.

Question 29

As production takes place, all manufacturing costs are added to the:

A)Work-in-Process Inventory account.
B)Manufacturing-Overhead Inventory account.
C)Cost-of-Goods-Sold account.
D)Finished-Goods Inventory account.
E)Production Labor account.

Question 30

A manufacturing firm produces goods in accordance with customer specifications, commencing production upon receipt of a purchase order.To accumulate the cost of each order, the company would use a:

A)job-cost record.
B)cost allocation matrix.
C)production log.
D)overhead sheet.
E)manufacturing cost record.

Question 31

Gonzales Company has developed an integrated system that coordinates the flow of all goods, services, and information into and out of the organization, working with raw material vendors as well as customers to improve service and reduce costs.The firm is said to be using:

A)participative management.
B)top-down management.
C)strategic cost management.
D)supply chain management.
E)management by objectives (MBO).

Question 32

Job-order costs are most useful for:

A)Controlling indirect costs of future production.
B)Determining inventory valuation using LIFO.
C)Determining the cost of a specific project.
D)Estimating the overhead costs included in transfer prices.
E)Determining costs by averaging the costs of all production.

Question 33

A custom-home builder would likely utilize:

A)job-order costing.
B)process costing.
C)mass customization.
D)process budgeting.
E)joint costing.

Question 34

Barnacle Industries incurred and applied the following manufacturing costs: During 20x2, Barnacle finished products costing $78,000.Products costing $32,500 were sold for $41,600.What is the balance of Finished Goods on Barnacle's balance sheet as of December 31, 20x2?

A)$117,000
B)$84,500
C)$78,000
D)$39,000
E)$45,500

Question 35

Dubois Decors is an interior decorator in St.Louis, Missouri.The following costs were incurred in the firm's contract to redecorate a corporate CEO's office. The firm's budget for the year included the following estimates: Overhead is applied to contracts using a predetermined overhead rate calculated annually.The rate is based on direct professional labor cost. What is the predetermined overhead rate?

A)62.5%
B)58.3%
C)160%
D)171%
E)None of these choices are correct.

Question 36

Barnacle Industries incurred and applied the following manufacturing costs: During 20x2, Barnacle finished products costing $78,000.Products costing $32,500 were sold for $41,600.What is the balance of Work-in-Process on Barnacle's balance sheet as of December 31, 20x2?

A)$117,000
B)$84,500
C)$75,400
D)$39,000
E)$45,500

Question 37

Which of the following statements about material requisitions is false?

A)Material requisitions are often computerized.
B)Material requisitions are a common example of source documents.
C)Material requisitions contain information that is useful to the cost accounting department.
D)Material requisitions authorize the transfer of materials from the production floor to the raw
E)Material requisitions are routinely linked to a bill of materials that lists all of the materials

Question 38

Which of the following manufacturers would most likely use job-order costing?

A)Chemical manufacturers.
B)Microchip processors.
C)Custom-furniture manufacturers.
D)Gasoline refiners.
E)Fertilizer manufacturers.

Question 39

Dubois Decors is an interior decorator in St.Louis, Missouri.The following costs were incurred in the firm's contract to redecorate a corporate CEO's office. The firm's budget for the year included the following estimates: Overhead is applied to contracts using a predetermined overhead rate calculated annually.The rate is based on direct professional labor cost. What is the total cost of the firm's contract to redecorate the CEO's office?

A)$155,000
B)$95,000
C)$191,000
D)$650,000
E)$132,500

Question 40

The final step in recognizing the completion of production requires a company to:

A)debit Finished-Goods Inventory and credit Work-in-Process Inventory.
B)debit Work-in-Process Inventory and credit Finished-Goods Inventory.
C)add direct labor to Work-in-Process Inventory.
D)add direct materials, direct labor, and manufacturing overhead to Work-in-Process
E)add direct materials to Finished-Goods Inventory.

Question 41

Osgood Company, which applies overhead at the rate of 190% of direct material cost, began work on job no.101 during June.The job was completed in July and sold during August, having accumulated direct material and labor charges of $27,000 and $15,000, respectively.On the basis of this information, the total overhead applied to job no.101 amounted to:

A)$0.
B)$28,500.
C)$51,300.
D)$70,500.
E)$79,800.

Question 42

Blakely charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of machine hours.The following data pertain to the current year: Budgeted manufacturing overhead: $480,000 Actual manufacturing overhead: $440,000 Budgeted machine hours: 20,000 Actual machine hours: 16,000 Overhead applied to production totaled:

A)$352,000.
B)$384,000.
C)$550,000.
D)$600,000.
E)None of these choices are correct.

Question 43

Boxer Industries worked on four jobs during its first year of operation: nos.401, 402, 403, and 404. A review of job no.403's cost record revealed direct material charges of $40,000 and total manufacturing costs of $50,000.If Boxer applies overhead at 150% of direct labor cost, the overhead applied to job no.403 must have been:

A)$0.
B)$6,000.
C)$4,000.
D)$3,333.
E)$5,000.

Question 44

Travers Manufacturing incurred $106,000 of direct labor and $11,000 of indirect labor.The proper journal entry to record these events would include a debit to Work in Process for:

A)$0 because Work in Process should be credited.
B)$0 because Work in Process is not affected.
C)$11,000.
D)$106,000.
E)$117,000.

Question 45

Overhead application is also known as:

A)cost allocation.
B)overhead cost distribution.
C)overhead absorption.
D)application costing.
E)overhead cost apportionment.

Question 46

Templeton Corporation recently used $75,000 of direct materials and $9,000 of indirect materials in production activities.The journal entries reflecting these transactions would include:

A)a debit to Manufacturing Overhead for $9,000.
B)a debit to Manufacturing Overhead for $84,000.
C)a debit to Raw-Material Inventory for $75,000.
D)a debit to Work-in-Process Inventory for $84,000.
E)a credit to Manufacturing Overhead for $9,000.

Question 47

When using normal costing, the total production cost of a job is composed of:

A)direct material and direct labor, only.
B)direct material, direct labor, manufacturing overhead, and outlays for selling costs.
C)direct material, direct labor, manufacturing overhead, and outlays for both selling and
D)direct material, direct labor, and applied manufacturing overhead.
E)direct material, direct labor, and actual manufacturing overhead.

Question 48

Hsu Company incurred $90,000 of depreciation for the year.Eighty percent relates to the firm's production facilities, and 20% relates to sales and administrative offices.If all items are handled in the proper manner, a review of the company's accounting records should reveal a:

A)debit to Depreciation Expense for $90,000.
B)debit to Manufacturing Overhead for $90,000.
C)debit to Manufacturing Overhead for $72,000.
D)debit to Work-in-Process Inventory for $18,000.
E)credit to Cash for $90,000.

Question 49

The left side of the Manufacturing Overhead account is used to accumulate:

A)actual manufacturing overhead costs incurred throughout the accounting period.
B)overhead applied to Work-in-Process Inventory.
C)underapplied overhead.
D)predetermined overhead.
E)overapplied overhead.

Question 50

The journal entry needed to record $5,000 of advertising for Oxner Manufacturing would include:

A)a debit to Advertising Expense.
B)a credit to Advertising Expense.
C)a debit to Manufacturing Overhead.
D)a credit to Manufacturing Overhead.
E)a debit to Projects-in-Process.

Question 51

Norwood Corporation uses a predetermined overhead rate of $20 per machine hour.In deriving this figure, the company's accountant used:

A)a denominator of budgeted machine hours for the current accounting period.
B)a denominator of actual machine hours for the current accounting period.
C)a denominator of actual machine hours for the previous accounting period.
D)a numerator of budgeted machine hours for the current accounting period.
E)a numerator of actual machine hours for the current accounting period.

Question 52

A review of a company's Work-in-Process Inventory account found a debit for materials of $67,000. If all procedures were performed in the correct manner, this means that the firm:

A)also recorded a credit to Raw-Material Inventory.
B)also recorded a credit to Manufacturing Supplies Inventory.
C)was accounting for the usage of direct materials.
D)was accounting for the usage of indirect materials.
E)also recorded a credit to Raw-Material Inventory and was accounting for the usage of

Question 53

The process of assigning overhead costs to the jobs that are worked on is commonly called:

A)service department cost allocation.
B)overhead cost distribution.
C)overhead application.
D)transfer costing.
E)overhead cost apportionment.

Question 54

Manufacturing overhead:

A)includes direct materials, indirect materials, indirect labor, and factory depreciation.
B)is easily traced to jobs.
C)includes all selling costs.
D)should not be assigned to individual jobs because it bears no obvious relationship to them.
E)is a pool of indirect production costs that must somehow be attached to each unit

Question 55

Metalica Company applies overhead based on machine hours.At the beginning of 20x1, the company estimated that manufacturing overhead would be $500,000, and machine hours would total 20,000.By 20x1 year-end, actual overhead totaled $525,000, and actual machine hours were 25,000.On the basis of this information, the 20x1 predetermined overhead rate was:

A)$0.04 per machine hour.
B)$0.05 per machine hour.
C)$20 per machine hour.
D)$21 per machine hour.
E)$25 per machine hour.

Question 56

Which of the following is the correct method to calculate a predetermined overhead rate?

A)Budgeted total manufacturing cost ÷ budgeted amount of cost driver.
B)Budgeted overhead cost ÷ budgeted amount of cost driver.
C)Budgeted amount of cost driver ÷ budgeted overhead cost.
D)Actual overhead cost ÷ budgeted amount of cost driver.
E)Actual overhead cost ÷ actual amount of cost driver.

Question 57

Jetison Industries makes batches of custom novelty items for companies to give away at career fairs.Job X24 for Xcel Corporation consists of 2,000 pens that light up inside the pen base when you write.In addition, the name and address of Xcel Corp.is printed on the pens.Direct material for these pens amount to $1,500; direct labor is $2,800; and manufacturing overhead is $1,600.Based on this information, what is the cost per pen for Job X24?

A)$1.40
B)$2.95
C)$3.39
D)$3.95
E)$4.40

Question 58

Electricity costs that were incurred by a company's production processes should be debited to:

A)Utilities Expense.
B)Accounts Payable.
C)Cash.
D)Manufacturing Overhead.
E)Work-in-Process Inventory.

Question 59

Which of the following statements about materials is false?

A)Acquisitions of materials are normally charged to the Purchases account.
B)The use of direct materials gives rise to a debit to Work-in-Process Inventory.
C)The use of indirect materials gives rise to a debit to Manufacturing Overhead.
D)The use of indirect materials gives rise to a credit to Manufacturing Supplies Inventory.
E)Direct materials are accounted for in a different manner than indirect materials.

Question 60

Farrina Manufacturing uses a predetermined overhead application rate of $8 per direct labor hour.A review of the company's accounting records for the year just ended discovered the following: Underapplied manufacturing overhead: $7,200 Actual manufacturing overhead: $392,000 Budgeted labor hours: 50,000 Simone's actual labor hours worked totaled:

A)48,100.
B)49,100.
C)49,900.
D)50,900.
E)cannot be determined based on the information presented.

Question 61

The estimates used to calculate the predetermined overhead rate will virtually always:

A)prove to be correct.
B)result in a year-end balance of zero in the Manufacturing Overhead account.
C)result in overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in
D)result in underapplied overhead that is closed to Cost of Goods Sold if it is immaterial in
E)result in either underapplied or overapplied overhead that is closed to Cost of Goods Sold

Question 62

Boston, Inc.applies manufacturing overhead at the rate of $40 per machine hour.Budgeted machine hours for the current period were anticipated to be 120,000; however, a lengthy strike resulted in actual machine hours being worked of only 90,000.Budgeted and actual manufacturing overhead figures for the year were $4,800,000 and $4,180,000, respectively.On the basis of this information, the company's year-end overhead was:

A)overapplied by $580,000.
B)underapplied by $580,000.
C)overapplied by $1,200,000.
D)underapplied by $1,200,000.
E)underapplied by $900,000.

Question 63

Under- or overapplied manufacturing overhead at year-end is most commonly:

A)charged or credited to Work-in-Process Inventory.
B)charged or credited to Cost of Goods Sold.
C)charged or credited to a special loss account.
D)prorated among Work-in-Process Inventory, Finished-Goods Inventory, and Cost of Goods
E)ignored because there is no effect on the Cash account.

Question 64

Xtreme Sports makes baseball bats.The company buys wood as a direct material.The company's Shaping Department processes the bats, which are transferred to the Coating Department where a sealant is applied.The Shaping Department began manufacturing 20,000 Babe Ruth sluggers during the month of October.There was no beginning inventory. Costs in the Shaping Department for the month of October were: A total of 16,000 bats were completed and transferred to the Coating Department; the remaining 4,000 bats were still in the Shaping Process at the end of the month.All of the Shaping Department's direct materials were placed in process, but on average, only 25% of the conversion cost was applied to the ending work-in-process inventory. What is the cost of the units transferred to Xtreme Sports' Coating Department?

A)$80,000.
B)$84,800.
C)$100,000.
D)$106,000.
E)$75,000.

Question 65

Flagler, Inc.disposes of under- or overapplied overhead at year-end as an adjustment to cost of goods sold.Prior to disposal, the firm reported cost of goods sold of $590,000 in a year when manufacturing overhead was underapplied by $15,000.If sales revenue totaled $1,400,000, determine (1) Flagler's adjusted cost of goods sold and (2) gross margin

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 66

Terrence Industries charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of labor hours.The following data pertain to the current year: Which of the following choices is the correct status of manufacturing overhead at year-end?

A)Overapplied by $10,000.
B)Underapplied by $10,000.
C)Overapplied by $35,000.
D)Underapplied by $35,000.
E)Overapplied by $45,000.

Question 67

Throughout the accounting period, the credit side of the Manufacturing Overhead account is used to accumulate:

A)actual manufacturing overhead costs.
B)overhead applied to Work-in-Process Inventory.
C)overapplied overhead.
D)underapplied overhead.
E)predetermined overhead.

Question 68

An accountant recently debited Work-in-Process Inventory and credited Manufacturing Overhead at a company that uses normal costing.The accountant was:

A)applying a predetermined overhead amount to production.
B)recognizing receipt of the factory utilities bill.
C)recording a year-end adjustment for an insignificant amount of underapplied overhead.
D)recognizing actual overhead incurred during the period.
E)recognizing the completion of production.

Question 69

Foxmoor Company applies manufacturing overhead by using a predetermined rate of 50% of direct labor cost.The data that follow pertain to job no.764: If Foxmoor adds a 40% markup on total cost to generate a profit, which of the following choices depicts a portion of the accounting needed to record the sale of job no.764?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 70

Armour, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor hours.Overhead was estimated to be $150,000, direct professional labor hours were estimated to be 15,000, and direct professional labor cost was projected to be $225,000.During the year, Armour incurred actual overhead costs of $146,000, actual direct professional labor hours of 14,500, and actual direct labor cost of $222,000.By year-end, the firm's overhead was:

A)$1,000 underapplied.
B)$1,000 overapplied.
C)$4,000 underapplied.
D)$4,000 overapplied.
E)$5,000 underapplied.

Question 71

Flores Company, which uses labor hours to apply overhead to manufacturing, may have increased amounts of underapplied overhead at month-end if:

A)suppliers of direct materials have an across-the-board price increase.
B)an accountant failed to record the period's charges for plant maintenance and security.
C)employees are hit hard with a widespread outbreak of the flu.
D)direct laborers are granted a wage increase.
E)outlays for advertising expenditures are increased.

Question 72

A computer manufacturer recently shipped several laptops to a customer (cost: $25,000) and billed the customer $30,000.Which of the following options correctly expresses the accounts that are debited and credited to record this transaction?

A)Debits: Accounts Receivable, Finished-Goods Inventory; credits: Sales Revenue, Cost of
B)Debits: Accounts Receivable, Cost of Goods Sold; credits: Sales Revenue, Finished-Goods
C)Debits: Sales Revenue, Cost of Goods Sold; credits: Accounts Receivable, Finished-Goods
D)Debits: Sales Revenue, Finished-Goods Inventory; credits: Accounts Receivable, Cost of
E)Debits: Accounts Receivable; credits: Finished-Goods Inventory, Profit on Sale.

Question 73

Bennington Company applies manufacturing overhead by using a predetermined rate of 150% of direct labor cost.The data that follow pertain to job no.831: If Bennington adds a 30% markup on total cost to generate a profit, which of the following choices depicts a portion of the accounting needed to record the credit sale of job no.831?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 74

Xtreme Sports makes baseball bats.The company buys wood as a direct material.The company's Shaping Department processes the bats, which are transferred to the Coating Department where a sealant is applied.The Shaping Department began manufacturing 20,000 Babe Ruth sluggers during the month of October.There was no beginning inventory. Costs in the Shaping Department for the month of October were: A total of 16,000 bats were completed and transferred to the Coating Department; the remaining 4,000 bats were still in the Shaping Process at the end of the month.All of the Shaping Department's direct materials were placed in process, but on average, only 25% of the conversion cost was applied to the ending work-in-process inventory. What is the cost of the work-in-process inventory in Xtreme Sports' Shaping Department at the end of October?

A)$5,200.
B)$15,200.
C)$21,200.
D)$25,000.
E)$34,000.

Question 75

The term "normal costing" refers to the use of:

A)job-costing systems.
B)computerized accounting systems.
C)targeted overhead rates.
D)predetermined overhead rates.
E)actual overhead rates.

Question 76

Mountain Man Corporation debited Cost of Goods Sold and credited Manufacturing Overhead at year-end.On the basis of this information, one can conclude that:

A)budgeted overhead exceeded actual overhead.
B)budgeted overhead exceeded applied overhead.
C)budgeted overhead was less than applied overhead.
D)actual overhead exceeded applied overhead.
E)actual overhead was less than applied overhead.

Question 77

When underapplied or overapplied manufacturing overhead is prorated, amounts can be assigned to which of the following accounts?

A)Raw-Material Inventory, Manufacturing Overhead, and Direct Labor.
B)Cost of Goods Sold, Work-in-Process Inventory, and Finished-Goods Inventory.
C)Work-in-Process Inventory, Raw-Material Inventory, and Cost of Goods Sold.
D)Raw-Material Inventory, Finished-Goods Inventory, and Cost of Goods Sold.
E)Raw-Material Inventory, Work-in-Process Inventory, and Finished-Goods Inventory.

Question 78

Douglas, Inc., employs a normal costing system.The following information pertains to the year just ended. Total manufacturing costs were $2,500,000. Cost of goods manufactured was $2,425,000. Applied manufacturing overhead was 30 percent of total manufacturing costs. Manufacturing overhead was applied to production at a rate of 80 percent of direct-labor cost. Work-in-process inventory on January 1 was 75 percent of work-in-process inventory on December 31. Based on this information, what amount is the total cost of direct material used during the year?

A)$750,000.
B)$812,500
C)$1,000,000.
D)$2,450,000.
E)$2,500,000.

Question 79

Rogers Manufacturing's overhead at year-end was underapplied by $5,800, a small amount given the firm's size.The year-end journal entry to record this amount would include:

A)a debit to Cost of Goods Sold.
B)a debit to Manufacturing Overhead.
C)a debit to Work-in-Process Inventory.
D)a credit to Cost of Goods Sold.
E)a credit to Work-in-Process Inventory.

Question 80

Douglas, Inc., employs a normal costing system.The following information pertains to the year just ended. Total manufacturing costs were $2,500,000. Cost of goods manufactured was $2,425,000. Applied manufacturing overhead was 30 percent of total manufacturing costs. Manufacturing overhead was applied to production at a rate of 80 percent of direct-labor cost. Work-in-process inventory on January 1 was 75 percent of work-in-process inventory on December 31. Based on this information, what is the total direct-labor cost for the year?

A)$750,000.
B)$600,000.
C)$909,375.
D)$937,500.
E)$1,041,667.