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Yesterday, 23:29

In the current year, Mitchell Manufacturing expected Job No. 13 to cost $600,000 of overhead, $650,000 of materials, and $400,000 of labor. Mitchell applied overhead based on direct labor cost. Actual production required an overhead cost of $420,000, $750,000 of materials used, and $300,000 of labor. All of the goods were completed. What amount was transferred from Work in Process to Finished Goods?

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  1. Yesterday, 23:52
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    Multiple choices:

    $1,670,000.

    $1,500,000.

    $1,650,000.

    $1,470,000.

    The correct option is $1,500,000

    Explanation:

    The overhead is applied on the basis of direct labor cost as follows:

    overhead allocation rate=$600,000/$400,000=1.5 times

    Materials used $750,000

    Labor cost $300,000

    prime cost $1,050,000

    overhead (direct labor cost*1.5) = 300,000*1.5 $450,000

    The amount of transferred finished goods from WIP $1,500,000

    The correct option is B,$1,500,000

    The option of $1,470,000 was computed by adding up all actual costs incurred without reference to the overhead allocation of 1.5
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