Karim Corporation 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.The standard cost card for the company's only product is as follows: During the year, the company started and completed 31,500 units.Direct labor employees worked 23,650 hours at an average cost of $19.50 per hour.

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 recording the direct labor costs, the Work in Process inventory account will increase (decrease)by:
A)$474,075
B)($474,075)
C)($461,175)
D)$461,175

Question

Karim Corporation 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.The standard cost card for the company's only product is as follows:  During the year, the company started and completed 31,500 units.Direct labor employees worked 23,650 hours at an average cost of $19.50 per hour.

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 recording the direct labor costs, the Work in Process inventory account will increase (decrease)by:
A)$474,075 
B)($474,075) 
C)($461,175) 
D)$461,175

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 = (31,500 units × 0.70 hours per unit)× $21.50 per hour = 22,050 hours × $21.50 per hour = $474,075.

Karim Corporation Uses a Standard Cost System in Which Inventories