The Work in Process Inventory Account of a Manufacturing Company

question 170

Multiple Choice

The Work in Process Inventory account of a manufacturing company has a $4,400 debit balance.The company applies overhead using direct labor cost.The cost sheet of the only job still in process shows direct material cost of $2,000 and direct labor cost of $800.Therefore,the company's predetermined overhead rate is:

• A)40% of direct labor cost.
• B)50% of direct labor cost.
• C)80% of direct labor cost.
• D)200% of direct labor cost.
• E)300% of direct labor cost.

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Definitions:

Accounting Profits

The net income of a company after all expenses, including taxes and operating costs, have been subtracted from total revenues, according to standard accounting practices.

Perfectly Competitive

A market structure characterized by a large number of small firms, identical products, and free entry and exit, leading to price taking behavior.

Long-Run Equilibrium

A state in which all factors of production and costs are variable, allowing firms to enter and exit the market, and no economic forces are pushing for change.

Efficient Scale

The level of production at which a company or industry can produce its products at the lowest average cost, optimizing resource use.