The Work in Process Inventory Account of a Manufacturing Company

question 101

Multiple Choice

The Work in Process inventory account of a manufacturing company shows a balance of $2,400 at the end of an accounting period. The job cost sheets of the two uncompleted jobs show charges of $400 and $200 for direct materials, and charges of $300 and $500 for direct labour. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labour costs, of:

• A)80%.
• B)125%.
• C)300%.
• D)240%.

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Definitions:

Quick Ratio

A measure of a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory, also known as the acid-test ratio.

Current Ratio

A liquidity metric that measures a company’s ability to pay short-term obligations with its current assets.

Industry Average

The average performance, metrics, or characteristics of companies within a particular sector.

Current Payables

Short-term obligations or debts a company owes to its creditors that are due within one year.