Question

Finished goods inventory is $182,000. If overhead applied to these goods is $75,000, and the overhead rate is 120% of direct labor, how much direct materials cost
was incurred in producing the inventory? (Round your intermediate calculations and final answer to nearest whole dollar.)

Answer 1

Answer:Direct Material cost To the nearest whole dollar becomes $45,000

Explanation:

Given that Total cost in the finished goods inventory = $182,000

Total cost = Direct Material cost  + Direct Labor cost + Overhead rate cost

But Overhead rate cost = 120% of labor cost

Since Over head cost = $75,000

Direct labor cost = $75,000/ 120%=$62,500

Total cost = Direct Material cost  + Direct Labor cost + Overhead rate cost

$182,000 = Direct Material cost+ $62,500+ $75,000

Direct Material cost = $182,000 - ( 62,500+75,000)

Direct Material cost = $182,000 -$137,500

Direct Material cost = $44,500

To the nearest whole dollar becomes $45,000