Newcastle Company's beginning and ending inventories for the month of January were as follows:

\begin{array}{lrr}&\text { January } 1&\text { January } 31\\ \text {Direct Materials } &£ 80,000 & £ 78,000\\ \text { Work in Process } &£ 155,000 &£ 166,000\\ \text { Finished Goods} &£ 90,000& £ 88,000\\\end{array}

Production data for month follow:

\begin{array}{lrr} \text { Direct labour cost incurred.} &£ 215,000\\ \text { Actual manufacturing overhead cost incurred } &£ 145,000\\ \text {Direct materials purchases} &£ 160,000\end{array}

Newcastle applies manufacturing overhead cost to jobs at the rate of 75% of direct labour cost incurred. This rate has been used for many years. The company does not close under- or overapplied manufacturing overhead to Cost of Goods Sold until the end of the year.
-The management accountant wants to apply manufacturing overhead at a rate of 75% of direct labour. The managing director wants to know how this change will affect reported profit. (Assuming Newcastle applies manufacturing overhead cost to jobs at the rate of 75% of direct labour cost incurred). Newcastle Company's Cost of Goods Sold for January was:

A)£512,000.
B)£529,250.
C)£522,000.
D)£496,000.

In Computing Its Predetermined Overhead Rate, Brady Company Included Its

Multiple Choice

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