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19 August, 04:56

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

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Answers (1)
  1. 19 August, 05:07
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    B. $2,000

    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
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