Question

Simmons Inc. applies overhead to production at a predetermined rate of 90% based on direct labor cost. Job No. 250, the only job still in process at the end of August, has been charged with manufacturing overhead of $8,100. What was the amount of direct materials charged to Job 250 assuming the balance in Work in Process inventory is $30,000?

Answer 1

To determine the amount of direct materials charged to Job 250, you need to use the predetermined overhead rate of 90% based on direct labor cost. The manufacturing overhead charged to Job 250 is $8,100, and the direct materials charged to Job 250 can be calculated as $900.

Step-by-step explanation:

To determine the amount of direct materials charged to Job 250, we need to use the predetermined overhead rate of 90% based on direct labor cost. The manufacturing overhead charged to Job 250 is $8,100. Therefore, the direct labor cost incurred for Job 250 can be calculated as follows:

Direct Labor Cost = Manufacturing Overhead / Predetermined Overhead Rate

Direct Labor Cost = $8,100 / 0.90 = $9,000

Since the predetermined overhead rate is based on direct labor cost, we can use this information to find the direct materials charged to Job 250. If we assume that the direct labor cost is 100%, then the direct materials charged can be calculated using the formula:

Direct Materials Charged = Direct Labor Cost * Direct Materials Percentage

Direct Materials Charged = $9,000 * (1 - Predetermined Overhead Rate)

Direct Materials Charged = $9,000 * (1 - 0.90)

Direct Materials Charged = $9,000 * 0.10 = $900