The direct labor rate for Brent Corporation is $9.00 per hour, and manufacturing overhead is applied to products using a predetermined overhead rate of $6.00 per direct labor-hour. During May, the company purchased $60,000 in raw materials (all direct materials) and worked 3,200 direct labor-hours. The Raw Materials inventory (all direct materials) decreased by $3,000 between the beginning and end of May. The Work in Process inventory on May 1 consisted of one job which had been charged with $4,000 in direct materials and on which 300 hours of direct labor time had been worked. There was no Work in Process inventory on May 31. If overhead was underapplied by $2,500 during May, the actual overhead cost for the month must have been:
A)$16,700
B)$21,700
C)$18,500
D)$23,500

Question

Quizplus · Accepted Answer

First, we need to calculate the total direct materials used during May:

Direct materials used = Beginning raw materials inventory - Ending raw materials inventory + Purchases
Direct materials used = $4,000 - ($3,000) + $60,000
Direct materials used = $61,000

Next, we need to calculate the total manufacturing costs incurred:

Total manufacturing costs = Direct materials used + Direct labor + Manufacturing overhead applied
Total manufacturing costs = $61,000 + ($9.00 x 3,200) + ($6.00 x 3,200)
Total manufacturing costs = $61,000 + $28,800 + $19,200
Total manufacturing costs = $109,000

From the problem, we know that overhead was underapplied by $2,500. This means that the manufacturing overhead applied was less than the actual overhead cost incurred. To find the actual overhead cost for May, we can use the following formula:

Actual overhead = Manufacturing overhead applied - Underapplied overhead
Actual overhead = $19,200 - $2,500
Actual overhead = $16,700

Therefore, the answer is B) $21,700.

The Direct Labor Rate for Brent Corporation Is $9