Natasha Co.'s Work in Process Inventory balance at the end of 2009 and 2010 was $200,000 and $150,000, respectively. During 2010, Natasha transferred $1,980,000 of completed products to finished goods. If $500,000 of direct labor and $300,000 overhead were added to Work in Progress Inventory during 2010, how many dollars of direct material was used in work in process?

Question

Quizplus · Accepted Answer

The total manufacturing costs added to Work in Process Inventory during 2010 include direct labor, overhead, and direct materials. The formula to calculate the direct materials used is: Direct Materials = Total Manufacturing Costs - Direct Labor - Overhead. First, find the total manufacturing costs by adding the beginning Work in Process Inventory, subtracting the ending Work in Process Inventory, and adding the costs of goods transferred to finished goods: $200,000 (beginning inventory) + $1,980,000 (transferred to finished goods) - $150,000 (ending inventory) = $2,030,000. Then subtract direct labor ($500,000) and overhead ($300,000) from the total manufacturing costs: $2,030,000 - $500,000 - $300,000 = $1,230,000. However, this calculation is incorrect based on the provided choices and the correct approach. The correct calculation should consider the total costs added and adjustments for inventory changes correctly. The correct approach involves adjusting the total added costs ($1,980,000 transferred + $500,000 labor + $300,000 overhead) by the change in Work in Process Inventory to find the direct materials used.