Harrison Company reports the following cost information for August:
$$\begin{array} { | l | r | }
\hline \text { Cost of goods manufactured } & \$ 135,800 \
\hline \text { Finished goods inventory, Aug. 1 } & 30,200 \
\hline \text { Finished goods inventory, Aug. 31 } & 35,300 \
\hline \text { Work in process inventory, Aug. 1 } & 22,500 \
\hline \text { Work in process inventory, Aug. 31 } & 18,500 \
\hline \text { Direct materials used } & 25,300 \
\hline
\end{array}$$ Direct labor incurred in August amounted to 150% of manufacturing overhead in August.
What is the amount of direct labor incurred by Harrison Company in August?
A) $131,800
B) $61,944
C) $49,556
D) $63,900

Question

Harrison Company reports the following cost information for August:
$$\begin{array} { | l | r | } 
\hline \text { Cost of goods manufactured } & \$ 135,800 \
\hline \text { Finished goods inventory, Aug. 1 } & 30,200 \
\hline \text { Finished goods inventory, Aug. 31 } & 35,300 \
\hline \text { Work in process inventory, Aug. 1 } & 22,500 \
\hline \text { Work in process inventory, Aug. 31 } & 18,500 \
\hline \text { Direct materials used } & 25,300 \
\hline
\end{array}$$ Direct labor incurred in August amounted to 150% of manufacturing overhead in August.
What is the amount of direct labor incurred by Harrison Company in August?
A) $131,800
B) $61,944
C) $49,556
D) $63,900

Quizplus · Accepted Answer

To find direct labor, we need to first determine manufacturing overhead. The cost of goods manufactured is the sum of direct materials, direct labor, and manufacturing overhead, adjusted for work in process inventory changes. The change in work in process inventory is $22,500 - $18,500 = $4,000. Therefore, the total manufacturing costs are $135,800 - $4,000 = $131,800. Direct materials are $25,300, so direct labor plus manufacturing overhead is $131,800 - $25,300 = $106,500. Let x be the manufacturing overhead, then direct labor is 1.5x. So, 1.5x + x = $106,500, which gives 2.5x = $106,500, thus x = $42,600. Therefore, direct labor is 1.5 * $42,600 = $63,900.

Harrison Company Reports the Following Cost Information for August Direct Labor Incurred in August Amounted to 150% of Manufacturing