Spencer Inc. applies overhead to production at a predetermined rate of 80% based on direct labor cost. Job No. 130 the only job still in process at the end of August has been charged with manufacturing overhead of $6400. What was the amount of direct materials charged to Job 130 assuming the balance in Work in Process inventory is $20000?

Question

Quizplus · Accepted Answer

To find the amount of direct materials charged to Job 130, we need to use the information given:

Manufacturing Overhead applied = $6,400

Predetermined overhead rate = 80% based on direct labor cost

From this, we can calculate the amount of direct labor cost incurred by Job 130:

Manufacturing Overhead applied = Predetermined overhead rate x Direct labor cost

$6,400 = 80% x Direct labor cost

Direct labor cost = $8,000

Since the predetermined overhead rate is based on direct labor cost, we can use this information to calculate the amount of manufacturing overhead applied to the job:

Manufacturing Overhead applied = Predetermined overhead rate x Direct labor cost

Manufacturing Overhead applied = 80% x $8,000

Manufacturing Overhead applied = $6,400

Finally, we can use the balance in Work in Process inventory and the manufacturing costs applied to the job to find the amount of direct materials charged to Job 130:

Total manufacturing costs applied = Manufacturing Overhead applied + Direct materials + Direct labor

$14,400 = $6,400 + Direct materials + $8,000

Direct materials = $14,400 - $6,400 - $8,000

Direct materials = $5600

Therefore, the answer is C, $5600.