Question

Denver Company uses a job costing system. The work in process inventory on December 31 consisted of Job No. 173 with a balance of $66,200. Job No. 173 has been charged with manufacturing overhead costs of $20,400. Denver allocates manufacturing overhead costs at a rate of 60% of direct labor cost. What was the amount of direct materials charged to Job No. 173?

Answer 1

Direct material= $11,800

Step-by-step explanation:

Giving the following information:

Total cost= $66,200

Job No. 173 has been charged with manufacturing overhead costs of $20,400. Denver allocates manufacturing overhead costs at a rate of 60% of direct labor cost.

First, we need to determine the direct labor cost.

Direct labor cost= allocated overhead/0.6

Direct labor cost= 20,400/0.6= 34,000

Now, we can calculate the direct material cost:

Direct material= total cost - direct labor - allocated overhead

Direct material= 66,200 - 54,400

Direct material= 11,800