Question

Douglas, Inc., employs a normal costing system. The following information pertains to the year just ended. Total manufacturing costs were $2,500,000. Cost of goods manufactured was $2,425,000. Applied manufacturing overhead was 30 percent of total manufacturing costs. Manufacturing overhead was applied to production at a rate of 80 percent of direct-labor cost. Work-in-process inventory on January 1 was 75 percent of work-in-process inventory on December 31. Based on this information, what amount is the total cost of direct material used during the year

Answer 1

Answer:

$812,500

Explanation:

The computation of the direct material used during the year is shown below:

As we know that

Total manufacturing cost = Direct material + direct labor + applied overhead

where

Applied overhead = 30% of total manufacturing cost

= 30% of $2,500,000

= $750,000

And, the direct labor is

= $750,000 ÷ 0.80

= $937,500

Now the direct material cost is

= $2,500,000 - $750,000 - $937,500

= $812,500

Answer 2

Based on the information given the total cost of direct material used during the year is: $812,500.

Using this formula

Total cost of direct material=Direct material + Direct labor + Applied overhead

Where:

Direct material=$2,500,000

Direct labor=30%×$2.500,000=$750,000

Applied overhead=$750,000/.80=$937,500

Let plug in the formula

Total cost of direct material=$2,500,000 - $750,000 - $937,500

Total cost of direct material=$812,500

Inconclusion  the total cost of direct material used during the year is : $812,500.

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