Arnold Corporation uses a job order costing system and applies manufacturing overhead using a predetermined overhead rate based on direct labor hours. The following data are available for August : Inventory : Raw Material : Beginning ; $42,000 Ending : $38,000 Work In Process : Beginning : $11,000 Ending : $17,000 Finished Goods : Beginning : $43,000 Ending : $47,000 Actual Costs For the Year : Raw Material Purchased : $65,000 Direct Labor Salaries Paid : $80,000 Direct Labor Pay Rate Per Hour : $10 Manufacturing Overhead Incurred : $65,000 Information From Annual Budget : Manufacturing Overhead Budgeted : $60,000 Direct Labor Hours Budgeted : 7,500 Question 1A) Compute the manufacturing cost for August : A) $210,000 B) $205,000 C) $209,000 D) $213,000 Solution Manufacturing cost = Direct labor + Raw material purchased + overheads =65,000+80,000+60,000 =$205,000.00 .

1. Arnold Corporation uses a job order costing system and applies manufacturing overhead using a
predetermined overhead rate based on direct labor hours. The following data are available for
August :
Inventory :
Raw Material : Beginning ; $42,000 Ending : $38,000
Work In Process : Beginning : $11,000 Ending : $17,000
Finished Goods : Beginning : $43,000 Ending : $47,000
Actual Costs For the Year :
Raw Material Purchased : $65,000
Direct Labor Salaries Paid : $80,000
Direct Labor Pay Rate Per Hour : $10
Manufacturing Overhead Incurred : $65,000
Information From Annual Budget :
Manufacturing Overhead Budgeted : $60,000
Direct Labor Hours Budgeted : 7,500
Question 1A) Compute the manufacturing cost for August :
A) $210,000 B) $205,000 C) $209,000 D) $213,000
Solution
Manufacturing cost = Direct labor + Raw material purchased + overheads

2. =65,000+80,000+60,000
=$205,000.00