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Wong, Singh & Campbell Inc. produces a wide range of specialized chemical products. The direct material, compound # 12XC, used in the production of
Wong, Singh & Campbell Inc. produces a wide range of specialized chemical products. The direct material, compound # 12XC, used in the production of all their products is highly sensitive and must be used in the exact in quantity and be of the highest quality. If there are defects in the product due to the slightest defect in the direct materials or mis measurement of the quantity of direct materials, the entire job must be scrapped. Therefore, most of the manufacturing overhead incurred is to inspect the quantity and quality of the direct materials before they are inputted into the manufacturing process. As a result, the company applies manufacturing overhead on the basis of the dollar value of direct materials used (not on the basis of raw materials purchased). To compute the predetermined manufacturing overhead rate the company has estimated the following: Manufacturing overhead $650,000 ( consists mainly of quality control inspection of direct materials before they are inputted to the production proess) Dollar value of direct materials to be used in production $500,000 The company's inventory accounts at the start of the year are as follows: Raw materials (all direct) Work in process Finished goods Beginning 80,000 70,000 400,000 Ending 20,000 150,000 260,000
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