Tyare Corporation had the following inventory balances at the beginning and end of May: During May, $65,000 in raw materials (all direct materials) were drawn from inventory and used in production. The company's predetermined overhead rate was $12 per direct labor-hour, and it paid its direct labor workers $15 per hour. A total of 430 hours of direct labor time had been expended on the jobs in the beginning Work in Process inventory account. The ending Work in Process inventory account contained $7,700 of direct materials cost. The Corporation incurred $43,950 of actual manufacturing overhead cost during the month and applied $43,500 in manufacturing overhead cost.The actual direct labor-hours worked during May totaled:
A) 2,930 hours
B) 3,663 hours
C) 3,625 hours
D) 5,160 hours

Question

Tyare Corporation had the following inventory balances at the beginning and end of May:  During May, $65,000 in raw materials (all direct materials) were drawn from inventory and used in production. The company's predetermined overhead rate was $12 per direct labor-hour, and it paid its direct labor workers $15 per hour. A total of 430 hours of direct labor time had been expended on the jobs in the beginning Work in Process inventory account. The ending Work in Process inventory account contained $7,700 of direct materials cost. The Corporation incurred $43,950 of actual manufacturing overhead cost during the month and applied $43,500 in manufacturing overhead cost.The actual direct labor-hours worked during May totaled:
A) 2,930 hours 
B) 3,663 hours 
C) 3,625 hours 
D) 5,160 hours

Quizplus · Accepted Answer

Beginning Work in Process (WIP) inventory = 430 direct labor-hours
Raw materials used = $65,000
Ending WIP inventory = $7,700 of direct materials cost
Manufacturing overhead cost applied = $43,500
Actual manufacturing overhead cost incurred = $43,950
Predetermined overhead rate = $12 per direct labor-hour
Direct labor rate = $15 per hour

To find out the direct labor-hours worked during May, we can use the following formula:

Direct labor-hours = (Total Manufacturing Costs − Raw Materials − Manufacturing Overhead) ÷ Direct Labor Rate

Total Manufacturing Costs = Beginning WIP inventory + Raw Materials used - Ending WIP inventory + Manufacturing Overhead applied

Total Manufacturing Costs = 430 + 65,000 - 7,700 + 43,500 = $100,230

Direct labor-hours = ($100,230 − $65,000 − $43,500) ÷ $15 = 3,625 hours

Therefore, the best choice is C) 3,625 hours.

Tyare Corporation Had the Following Inventory Balances at the Beginning