Question

Bennington Company applies manufacturing overhead by using a predetermined rate of 120% of direct labor cost. The data that follow pertain to job no. 831:
Direct material cost $83,000
Direct labor cost 41,000
If Bennington adds a 20% 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 ofjob no. 831?
Account Debited Amount
A. Accounts Receivable $173,200
B. Accounts Receivable $207,840
C. Finished-Goods Inventory $173,200
D. Finished-Goods Inventory $207,840
E. Sales Revenue $207,840
Multiple Choice
a. Choice A
b. Choice B
c. Choice C
d. Choice D
e. Choice E

Answer 1

Answer:

B. Accounts Receivable $207,840

Explanation:

Direct material cost $83,000

Direct labor cost $41,000

Manufacturing overhead applied = $41,000 * 120% = $49,200

Total cost = $83,000  + $41,000 + $49,200 = $173,200

Markup at the rate of 20% of total cost = $173,200 * 20% = $34,640(Gross profit)

Gross profit + Cost = Revenue

$173,200 + $34,640 = $207,840

Credit sales will be recorded as follows:

Dr. Accounts receivable - $207,840

Cr. Sales                           - $207,840