Kita Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs. There is no variable manufacturing overhead. The standard cost card for the company's only product is as follows:
During the year, the company assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 24,820 hours at an average cost of $21.20 per hour.
Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation.

-When recording the direct labor costs,the Cash account will increase (decrease)by:
A) ($514,960)
B) ($526,184)
C) $526,184
D) $514,960

Question

Kita Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs. There is no variable manufacturing overhead. The standard cost card for the company's only product is as follows:
  During the year, the company assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 24,820 hours at an average cost of $21.20 per hour.
Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation.
  
-When recording the direct labor costs,the Cash account will increase (decrease)by:
A) ($514,960) 
B) ($526,184) 
C) $526,184 
D) $514,960

Quizplus · Accepted Answer

Cash decreases by the actual amount paid to direct laborers, which is AH × AR = 24,820 hours × $21.20 per hour = $526,184.

Kita Corporation Manufactures One Product