Quigley Company's Records Indicate the Following Information for the Year

question 5

Multiple Choice

Quigley Company's records indicate the following information for the year: On December 31, a physical inventory determined that ending inventory of $600,000 was in the warehouse. Quigley's gross profit on sales has remained constant at 30%. Quigley suspects some of the inventory may have been taken by some new employees. At December 31, what is the estimated cost of missing inventory?

• A) $100,000
• B) $200,000
• C) $300,000
• D) $700,000

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Definitions:

Predetermined Rate

A rate estimated before the start of a period, often used in budgeting and costing processes.

Direct Labour Cost

The wages or salaries paid to employees directly involved in the production of goods or services, excluding indirect labor involved in supportive functions.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders based on a predetermined basis such as direct labor hours.

Direct Labour-Hours

The total hours of labor directly involved in the production of goods or services, often used as a basis for allocating overhead costs.