50.1K

Verified Solution

Link Copied!

Oil andGas Products Ltd. operates out of Medicine Hat and manufactures unique, custom made pumpjacks for the oil and gas industry.

For the year ended November 2022 the company estimated (budgeted) $112,000 in manufacturing overhead cost, $224,000 in direct labour and 14,000 direct labour hours

The company applies manufacturing overhead costs on the basis of actual direct labour hours.

For the past four years the budgeted direct labour hourly rate has equalled the actual direct labour hourly rate.

The predetermined manufacturing overhead application rate has not changed since 2019

The company has a November 30 year end for accounting and tax purposes

The following information is available for the year ended November 30, 2022.

1. Manufacturing overhead was overapplied by $10,000

2. Sales commissions are 4% of sales revenue.

3. Raw Materials purchased during the totalled $643,520. All purchased on account.

4. Of the raw materials that were used during the year, $35,000 were in indirect raw materials.

5. The opening raw materials inventory was $10,000.

6. The corporate income tax rate is 11%.

7. Administrative expenses incurred in the year were $148,000.

8. The actual factory payroll was $248,725 ($22,725 of that was for indirect labour).

9. The company's insurance policy covers the calendar year January 1 to December 31. The opening prepaid insurance balance on December 1, 2021 was $1,600. The company paid additional insurance premiums of $13,200 during their current fiscal year. 75% of the insurance relates to the factory. 25% percent of the insurance relates to selling and administration.

10. The November 30, 2022 balance of raw materials inventory was $18,000.

11. Utilities incurred during the year in the factory was $17,000; selling and administrative utilities were: $2,500.

12. Total sales revenue for the yearwas $1,800,000. According to their job cost sheets those pumpjacks that were sold cost $1,100,000 to manufacture.

13. During the year, pumpjacks that cost $950,000 to manufacture according to their job sheets were completed and transferred to the finished goods warehouse.

14. The work-in-process inventory on November 30, 2022 had incurred $15,192 of direct raw materials and 72 actual direct labour hours.

15. The work-in-process inventory on November 30, 2021 had $24,952 of direct raw materials and 102 actual direct labour hours.

16. The adjusted balance of finished goods inventory on November 30, 2021 was $350,000.

17. Depreciation charges for the year totalled $20,000. This amount was allocated to the factory equipment and to the selling administrative equipment.

Answer & Explanation Solved by verified expert

See Answer