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15 April, 08:41

Finished goods inventory is $188,000. If overhead applied to these goods is $78,000, and the overhead rate is 120% of direct labor, how much direct materials cost was incurred in producing the inventory

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  1. 15 April, 09:04
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    Direct materials cost of $45,000 was incurred in producing the inventory.

    Explanation:

    Finished Goods Inventory value include the direct material cost dirrect labor cost and manufacturing overhead cost.

    As given overhead are applied using rate of 120% of total direct labor cost.

    Direct Labor cost = Total overhead applied / Overhead Rate

    Direct Labor cost = $78000 / 120% = $65,000

    As we know

    Finished goods inventory = direct materials cost + direct labor cost + overhead applied

    $188,000 = direct materials cost + $65,000 + $78,000

    $188,000 = direct materials cost + $143,000

    direct materials cost = $188,000 - $143,000 = $45,000
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Home » Business » Finished goods inventory is $188,000. If overhead applied to these goods is $78,000, and the overhead rate is 120% of direct labor, how much direct materials cost was incurred in producing the inventory
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