Question

If cost of goods manufactured is $306,790, beginning work in process inventory, $25,000, and cost to manufacture, $300,000, the ending work in process inventory balance is $18,210. With direct labor costing $140,000 and direct materials costing $90,000, manufacturing overhead is $________.

Answer 1

Manufacturing overhead is consists of indirect materials, indirect labor, and other indirect costs. To solve the problem, a portion of manufacturing income statement looks like this:

Direct material -----------------------$90,000
Direct labor ---------------------------$140,000
Manufacturing overhead--------________
Total cost to manufacture         $300,000
Add: Work in process, beg       $  25,000
Less: Work in process, end      $     18,210
Cost of goods manufactures---$ 306,790

So, to solve the (?) in the above format, manufacturing overhead (MO) is derived as follows:

MO = Cost to manufacture - prime cost 
      = $300,000 - ($140,000 + $90,000)
      = $70,000

Thus, manufacturing overhead is $70,000.