Question
Wong, Singh & Campbell Inc. produces a wide range of specialized chemical products. The direct material, compound # 12XC, used in the production of all
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:
Beginning Ending Raw materials ( all direct) 80,000 20,000 Work in process 70,000 150,000 Finished goods 400,000 260,000Purchases of raw materials { all direct} 510,000 Direct labour cost 90,000 Manufacturing Overhead Indirect labour [ quality inspectors} 625,000 Property taxes factory 20,000 Depreciation of factory equipment 25,000 M aintenance of factory 30,000 Insurance for factory 15,000 Factory rent 45,000 Depreciation deliyery trucks 70,000 Sales salaries 200,000Step by Step Solution
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