Question

A company's overhead rate is 60% of direct labor cost. Using the following incomplete accounts, determine the cost of direct materials used. Work in Process Inventory Beginning WIP 116,900 Direct materials ? Direct labor ? Applied overhead ? To finished goods ? Ending WIP 152,000 Factory Overhead 116,900 105,210 Finished Goods Inventory Beginning FG 137,100 376,700 349,100

Answer 1

The cost of direct materials used is $124,090

Step-by-step explanation:

Ending Finished Goods = $349,100 - $376,700 = $137,100 - ($27,600)

Ending Finished Goods = $109,500

Calculation of Direct labor

Here, the company's overhead cost is 60% of direct labor cost

Ending factory overhead cost = 60% * Direct labor cost

$109,500 = 60% * Direct labor cost

Direct labor cost = $109,500 / 60%

Direct labor cost = $182,500

Calculation of direct materials cost

Particular Amount

Beginning finished goods inventory $376,700

Add: Ending WIP $152,000

Less: Beginning WIP $116,900

Less: Direct labor $182,500

Less: Ending Factory overhead $105,210

Direct Material Cost $124,090

Hence, the cost of direct materials used is $124,090.