During the month of January, Enterprise Inc. had total manufacturing costs of $110,000. They incurred $40,000 of direct labor cost and $30,000 of overhead cost during the month. If the materials inventory on January 1 was $3,000 less that the materials inventory on January 31, what was the cost of materials purchased during the month?
A) $37,000
B) $43,000
C) $40,000
D) none of these

Question

Quizplus · Accepted Answer

We can use the formula:
Total Manufacturing Costs = Direct Materials + Direct Labor + Manufacturing Overhead
$110,000 = Direct Materials + $40,000 + $30,000
Direct Materials = $40,000

We also know that the materials inventory on January 1 was $3,000 less than the inventory on January 31. This means that $3,000 worth of materials were used during the month.

Therefore, the cost of materials purchased during the month was:
Direct Materials Purchased = Direct Materials Used + Decrease in Materials Inventory
Direct Materials Purchased = $40,000 + $3,000
Direct Materials Purchased = $43,000

So, the correct answer is B) $43,000.

During the Month of January, Enterprise Inc