Question

The ending inventory of finished goods has a total cost of $9,400 and consists of 1,000 units. If the overhead applied to these goods is $3,476, and the overhead rate is 79% of direct labor, how much direct materials cost was incurred in producing these units

Answer 1

Total direct material cost= $1,524

Step-by-step explanation:

First, we need to calculate the unitary total cost:

Unitary production cost= 9,400/1,000= $9.4

Now, we need to determine the unitary direct labor cost:

Unitary direct labor cost= overhead applied / overhead rate

Unitary direct labor cost= 3.476 / 0.79

Unitary direct labor cost= $4.4

Finally, the direct material cost:

Unitary production cost= direct material + direct labor + allocated overhead

9.4 = direct material + 4.4 + 3.476

direct material= $1.524

Total direct material cost= 1.524*1,000= $1,524