Question

The ending inventory of finished goods has a total cost of $9,000 and consists of 600 units. If

the overhead applied to these goods is $3,000, and the overhead rate is 75% of direct labor, how
much direct materials cost was incurred in producing these units?
A. $3,750
B. $2,000
C. $4,000
D. $6,000
E. $9,000

Answer 1

B. $2,000

Step-by-step explanation:

Given;

Total cost of ending inventory = $9,000

Total number of units = 600

Over heads cost = $3,000 and the overhead rate is 75% of direct labor

Let direct labour cost be y

75% × y = 3000

3y/4 = 3000

y = 4 × 3000/3

y = $4,000

Total Inventory cost = direct material cost + direct labour cost + overheads

9000 = direct material cost + 4000 + 3000

direct material cost = 9000 - 7000

= $2,000