Lock Co. applies factory overhead to production on the basis of direct labor costs. Assume that at the beginning of the current year the company estimated that direct material costs would be $178,800, direct labor costs would be $154,000, and factory overhead costs would be $231,000.(1) If the $28,000 cost of Lock's Work in Process Inventory included $5,200 of direct labor cost, what amount of direct materials cost was included?(2) If instead $8,100 of the company's $34,300 Finished Goods Inventory was direct materials cost, determine the direct labor cost and factory overhead cost of the finished goods inventory.
What will be an ideal response?
| (1) | Overhead rate: ($231,000/$154,000) = 150% | ? | ? |
| ? | ? | ? | ? |
| ? | Total cost of work in process inventory …………… | ? | $28,000 |
| ? | Deduct: Direct labor ……………………………….. | $5,200 | ? |
| ? | Factory overhead ($5,200 ? 150%) ……………… | 7,800 | 13,000 |
| ? | Direct materials ……………………………………. | ? | $15,000 |
| ? | ? | ? | ? |
| (2) | The overhead rate is 150%. (part 1) | ? | ? |
| ? | ? | ? | ? |
| ? | Total cost of finished goods inventory …………….. | $34,300 | ? |
| ? | Direct materials ……………………………………. | 8,100 | ? |
| ? | Direct labor and factory overhead costs …………… | $26,200 ? | ? |
Direct Labor = $10,480
OH = DL ? 1.5
OH = $10,480 ? 1.5
OH = $15,720
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