The Duggart Company had the following transactions and events during its first year of operations. Estimated overhead for the year was $770,000; estimated direct labor cost for the year was $350,000. 1. Purchased materials on account, $567,000.2. Requisitioned materials for production as follows: direct materials - 85 percent of purchases, indirect materials - 12 percent of purchases.3. Direct labor for production is $331,000, indirect labor is $125,000.4. Overhead incurred (not including materials or labor): $529,000.5. Overhead is applied to production based on direct labor cost at the rate of ________.6. Goods costing $976,000 were completed during the period.7. Goods costing $513,200 were sold on account for $776,000.Required:Determine the ending balances for:(a) Materials

Question

Inventory(b) Work-in-Process Inventory(c) Finished Goods Inventory  

What will be an ideal response?

Answer 1

Overhead rate = $770,000/$350,000 = 220%.

(a)
$0 + $567,000 - ($567,000 × 85%) - ($567,000 × 12%) = $17,010.

(b)
$0 + ($567,000 × 85%) + $331,000 + ($331,000 × 220%) - $976,000 = $565,150.

(c)
$0 + $976,000 - $513,200 = $462,800.