Question

For its first year of operations, Darcy Company estimated manufacturing overhead (MOH) would be $108,000, and the company chose to apply MOH using a predetermined overhead rate based on estimated direct labor hours (DLHs). For the year, debits to its work in process account totaled $550,000 and credits totaled $480,000. While management estimated that employees would work 18,000 DLHs, bsiness was stronger than expecteed and actual DLHs totaled 20,000 hour.

Darcy's ending work in process inventory consisted of one job, Job 42. The job had been charged with $27,000 of direct labor cost. which consisted of 2000 actual DLH. The direct materials cost in job 42 totaled:

A. $31,000

B. $41,000

C. $28,000

D. $32,000

E. None of the above

Answer 1

A) $31,000

(Work-in-Process Balance : $70,000 ($550,000 - $480,000)

Direct Labor: $27,000

Manufacturing Overhead Cost: $12,000 (2,000 DLH * $6 ($108,000/18,000 DLHs = $6 per DLH)

Therefore Direct Materials Cost is $70,000 - $27,000 - $12,000 = $31,000.)