Marion Company uses a job order costing system. The work in process inventory on December 31, 2009, consisted of Job No. 175 with a balance of $53,400. Job No. 175 has been charged with manufacturing overhead of $16,000. Marion allocates manufacturing overhead at a rate of 80% of direct labor cost. What was the amount of direct materials charged to Job No. 175?

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The manufacturing overhead is 80% of the direct labor cost. If the overhead is $16,000, then the direct labor cost is $16,000 / 0.8 = $20,000. The total cost for Job No. 175 is $53,400, which includes direct materials, direct labor, and overhead. Therefore, the direct materials cost is $53,400 - $20,000 (direct labor) - $16,000 (overhead) = $17,400.

Marion Company Uses a Job Order Costing System