Question

Bennington Company applies manufacturing overhead by using a predetermined rate of 150% of direct labor cost. The data that follow pertain to job no. 831:

Direct material cost$72,000 Direct labor cost 38,000 If Bennington adds a 30% markup on total cost to generate a profit, which of the following choices depicts a portion of the accounting needed to record the credit sale of job no. 831?
A) Accounts Recievable 167,000
B) Accounts Recievable 217,100
C) Finnished Goods Inventory 167,000
D) Finnished Goods Inventory 217,100
E) Sales Revenue 217,100
And why?

Answer 1

Answer: Accounts Recievable 217,100

Step-by-step explanation:

The following information can be gotten from the question:

Direct material cost = $72,000

Direct labor cost = $38,000

Predetermined rate = 150%

The manufacturing overhead appiled will be calculated as:

= $38,000 x 150%

= $38000 × 1.5

= $57,000

Therefore, the total cost incurred will be calculated as:

= $72,000 + $38,000 + $57,000

= $167,000

The total cost is being markup at 30% and this will be:

= $167,000 x 30%

= $167000 × 0.3

= $50,100

Therefore, the selling price will then be:

= $167,000 + $50,100

= $217,100

Therefore, the accounting needed to record the credit sale of job no. 831 will be:

Debit: Accounts receivable $217,100

Credit: Sales $217,100

The correct option is:

B. Accounts Recievable 217,100