Smith Company reports the following information:

Factory overhead is 75% of the cost of direct labor.Work in process inventory on December 31 is
A) $16,250
B) $8,500
C) $18,750
D) $13,500

Question

Smith Company reports the following information: ​
​
 Factory overhead is 75% of the cost of direct labor.Work in process inventory on December 31 is
A) $16,250 
B) $8,500 
C) $18,750 
D) $13,500

Quizplus · Accepted Answer

We cannot determine the exact amount of work in process inventory on December 31 just from the information given. However, we do know that factory overhead is 75% of the cost of direct labor. Without knowing the amount of direct labor, we cannot calculate the amount of factory overhead, which is necessary to determine the total cost of work in process inventory. Therefore, the best answer choice is D, which acknowledges that we cannot determine the exact amount and implies that we need more information to do so.

Smith Company Reports the Following Information: ​

Smith Company Reports the Following Information: