Reference: 03-05
Mallet Company Had Only Job 844 in Process

Multiple Choice

Reference: 03-05
Mallet Company had only Job 844 in process on March 1 of the current year. The job had been charged with
$2,000 of direct material cost, $2,500 of direct labour cost, and $1,750 of manufacturing overhead cost. The company assigns overhead cost to jobs at a predetermined rate of 70% of direct labour cost. Any underapplied or overapplied overhead cost is closed to Cost of Goods Sold at the end of the month.
During March, the following activity and amounts were recorded by the company: $$\begin{array} { | l | l | } \hline \text { Raw materials (all direct materials) : } & \\\hline \text { Purchased during the month } & \$ 29,500 \\\hline \text { Used in production } & \$ 30,500 \\\hline & \\\hline \text { Labour: } & \\\hline \text { Direct labour hours worked during the month } & 2,500 \\\hline \text { Direct labour cost incurred } & \$ 26,500 \\\hline \text { Indirect labour costs incurred } & \$ 5,500 \\\hline & \\\hline \text { Manufacturing overhead costs incurred (total) } & \$ 18,500 \\\hline & \\\hline \text { Inventories: } & \\\hline \text { Raw materials (all direct) March 31 } & \$ 7,500 \\\hline \text { Work in process, March 31 } & \$ 14,500 \\\hline\end{array}$$ Work in process inventory contained $5,500 of direct labour cost.
-The entry to dispose of the underapplied or overapplied overhead cost for the month would include:

A) a debit of $50 to Cost of Goods Sold.
B) a debit of $5,500 to Manufacturing Overhead.
C) a credit of $5,500 to Cost of Goods Sold.
D) a debit of $50 to Manufacturing Overhead.