Fisher Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs.The following information about Fisher Corporation's Work in Process inventory account has been provided for the month of May: During the month, Fisher Corporation's Work in Process inventory account was credited for $120,500, which represented the Cost of Goods Manufactured for the month.Only one job remained in process on May 31; this job had been charged with $9,600 of applied overhead cost.The amount of direct materials cost in the unfinished job would be:
A)$10,600
B)$16,700
C)$12,800
D)$23,400

Question

Fisher Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to  jobs.The following information about Fisher Corporation's Work in Process inventory account has been provided for the month of May:  During the month, Fisher Corporation's Work in Process inventory account was credited for $120,500, which represented the Cost of Goods Manufactured for the month.Only one job remained in process on May 31; this job had been charged with $9,600 of applied overhead cost.The amount of direct materials cost in the unfinished job would be:
A)$10,600 
B)$16,700 
C)$12,800 
D)$23,400

Quizplus · Accepted Answer

11ea7998_5efb_035d_911b_5b27a24462c1_TB2627_00_TB2627_00 Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred
$37,500 = Predetermined overhead rate × $50,000
Predetermined overhead rate = $37,500 ÷ $50,000 = 0.75
$9,600 = 0.75 × Amount of the allocation base incurred by the job
Amount of the allocation base incurred by the job = $9,600 ÷ 0.75 = $12,800
Work In Process inventory = Direct materials + Direct labor + Manufacturing overhead
$33,000 = Direct materials + $12,800 + $9,600
Direct materials = $33,000 - ($12,800 + $9,600)= 10,600

Fisher Corporation Uses a Predetermined Overhead Rate Based on Direct