Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 17

Product costing-various issues Clay Co. produces ceramic coffee mugs and pencil holders. Manufacturing overhead is assigned to production using an application rate based on direct labor hours.
Required:
a. For 2016 the company's cost accountant estimated that total overhead costs incurred would be $408,750 and that a total of 54,500 direct labor hours would be worked. Calculate the amount of overhead to be applied for each direct labor hour worked on a production run.
b. A production run of 750 coffee mugs used raw materials that cost $810 and used 90 direct labor hours at a cost of $9.50 per hour. Calculate the cost of each coffee mug produced.
c. At the end of October 2016, 530 coffee mugs made in the production run in part b had been sold and the rest were in ending inventory. Calculate (1) the cost of the coffee mugs sold that would have been reported in the income statement and (2) the cost included in the April 30, 2016, finished goods inventory.