Mangrum 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. Information concerning the direct labor standards 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 12,790 hours at an average cost of $19.50 per hour. The company calculated the following direct labor variances for the year:
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 Work in Process inventory account will increase (decrease)by:
A) ($249,405)
B) $249,405
C) ($281,435)
D) $281,435

Question

Mangrum 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. Information concerning the direct labor standards 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 12,790 hours at an average cost of $19.50 per hour. The company calculated the following direct labor variances for the year:
  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 Work in Process inventory account will increase (decrease)by:
A) ($249,405) 
B) $249,405 
C) ($281,435) 
D) $281,435

Quizplus · Accepted Answer

Work in Process increases by the standard cost of the standard amount of hours allowed for the actual output, which is SH × SR = (18,700 units × 0.70 hours per unit) × $21.50 per hour = 13,090 hours × $21.50 per hour = $281,435.

Mangrum Corporation Manufactures One Product