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Solvent Index is a company manufacturing cleaning products. While the company manufactures many products, the manager of the company asked for your help in determining
Solvent Index is a company manufacturing cleaning products. While the company manufactures many products, the manager of the company asked for your help in determining the cost that should be assigned to the inventory of window cleaner (WC) and the disinfectant bleach cleaner (BC). The manager provides you with the following information regarding the two products: WC BC Direct Materials $ 1.70 per bottle $2.27 per bottle Variable Overhead Costs $0.25 per bottle 0.35 per bottle The manager also provides you with a list of other costs incurred by the company: Factory Utilities $475,000 per year Factory Equipment $690,000 per Depreciation year Factory Building Depreciation $400,000 per year Administrative $520,000 per Factory Building Depreciation $400,000 per year $520,000 per Administrative Costs year $230,000 per Production Equipment Maintenance year The following table relates to the production and inventory level of the company for the past year: WC BC Beg Inventory 235,000 bottles 87,000 bottles Bottles produced during the year 3,860,000 bottles 2,800,000 bottles Ending Inventory 105,000 bottles 35,000 bottles Solvent Index uses job order costing and applies the FIFO costing system to keep track of the cost of their inventory. They also have a policy of using DMH to allocate the overhead costs. There was a total of 840,000 Direct Machine Hours (DMH) used by Solvent index during the year. The total DMH used in the production of a WC bottle is 0.05DMH while a BC bottle requires 0.04 DMH
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