Question

6. Stone Company has no beginning and ending inventories, and reports the following data about its only product:

Direct materials used                                             $375,000

Direct labor                                                               $125,000

Fixed indirect manufacturing                             $100,000

Fixed selling and administrative                       $150,000

Variable indirect manufacturing                          $50,000

Variable selling and administrative                  $110,000

Selling price(per unit)                                                    $100

Units produced and sold                                          17,500

Stone Company uses the absorption approach to prepare the income statement. What is the manufacturing cost of goods sold?

A) $375,000

B) $500,000

C) $650,000

D) $700,000   

7. Smart Company is trying to decide which product to manufacture. Expected direct materials costs are $6.00 per unit for each product. The expected direct labor costs are $3.00 per unit for one product and $5.00 per unit for another product. In choosing between the two products, the direct materials costs are ________ and the direct labor costs are ________.

A) relevant; irrelevant

B) relevant; relevant

C) irrelevant; irrelevant

D) irrelevant; relevant

Answer 1