Before the application of overhead costs Chrome & Steel Ltd has the following costs traced to production:
Direct materials Direct labour
Charged to production $50 000 $40 000
Assuming that overhead is applied at the rate of 80% of direct labour cost what is the amount of inventory finished for the period (assume no work in process)?

Question

Quizplus · Accepted Answer

Overhead cost applied = 80% of direct labor cost = 80% of $40,000 = $32,000
Total cost charged to production = Direct materials + Direct labor + Overhead = $50,000 + $40,000 + $32,000 = $122,000
Therefore, the amount of inventory finished for the period is $122,000. Option C is the correct answer.

Before the Application of Overhead Costs Chrome & Steel Ltd