Shankland 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 and any variances are closed directly to Cost of Goods Sold.There is no variable manufacturing overhead.The standard cost card for the company's only product is as follows:
The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $67,500 and budgeted activity of 7,500 hours.During the year,24,600 units were started and completed.Actual fixed overhead costs for the year were $84,800.
Assume that all transactions are recorded on a worksheet as shown in the text.On the left-hand side of the equals sign in the worksheet are columns for Cash,Raw Materials,Work in Process,Finished Goods,and PP&E (net).All of the variance columns are on the right-hand-side of the equals sign along with the column for Retained Earnings.
When applying fixed manufacturing overhead to production,the Work in Process inventory account will increase (decrease)by:
A) $110,700
B) ($6,800)
C) ($110,700)
D) $6,800

Question

Shankland 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 and any variances are closed directly to Cost of Goods Sold.There is no variable manufacturing overhead.The standard cost card for the company's only product is as follows:
 The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $67,500 and budgeted activity of 7,500 hours.During the year,24,600 units were started and completed.Actual fixed overhead costs for the year were $84,800.
Assume that all transactions are recorded on a worksheet as shown in the text.On the left-hand side of the equals sign in the worksheet are columns for Cash,Raw Materials,Work in Process,Finished Goods,and PP&E (net).All of the variance columns are on the right-hand-side of the equals sign along with the column for Retained Earnings.
When applying fixed manufacturing overhead to production,the Work in Process inventory account will increase (decrease)by:
A) $110,700 
B) ($6,800) 
C) ($110,700) 
D) $6,800

Quizplus · Accepted Answer

Work in Process increases by the standard amount of hours allowed for the actual output multiplied by the predetermined overhead rate, which is (24,600 units × 0.50 hours per unit) × $9.00 per hour = 12,300 hours × $9.00 per hour = $110,700.

Shankland Corporation Manufactures One Product