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​ $20,000. Denver allocates manufacturing overhead costs at a rate of​ 50% of direct labor cost. What was the amount of direct materials charged to job no.​ 173?

Answer 1

Calculation of amount of direct materials charged to job no. 173:

It is given that 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 $20,000. Denver allocates manufacturing overhead costs at a rate of 50% of direct labor cost. It means the direct labor cost would be 20,000/50% = $40,000

Now we can calculate the amount of direct materials charged to job no. 173 as follows:

Direct material Cost =   Total Cost allocated to Job – Direct Labor Cost – Manufacturing Overhead Cost

= 66200-40000-20000

= 6200

Hence, the amount of direct materials charged to job no. 173 is $6,200