Fisher,Inc.recently lost a portion of its records in an office fire.The following information was salvaged from the accounting records.
Direct labor cost incurred during the period amounted to 1.5 times the factory overhead.The CFO of Fisher,Inc.has asked you to recalculate the following accounts and to report to him by the end of the day.
What is the amount of direct materials used?
A)$24,000.
B)$28,000.
C)$31,000.
D)$36,000. = (use the WIP account) = $58,000 + $10,500 - $12,500 - $10,000 - (1.5 x $10,000)= $31,000

Question

Fisher,Inc.recently lost a portion of its records in an office fire.The following information was salvaged from the accounting records. 
Direct labor cost incurred during the period amounted to 1.5 times the factory overhead.The CFO of Fisher,Inc.has asked you to recalculate the following accounts and to report to him by the end of the day.
What is the amount of direct materials used?
A)$24,000. 
B)$28,000. 
C)$31,000. 
D)$36,000. = (use the WIP account) = $58,000 + $10,500 - $12,500 - $10,000 - (1.5 x $10,000)= $31,000

Quizplus · Accepted Answer

We can calculate the direct materials used by using the WIP account formula, which is beginning WIP inventory plus direct materials used minus ending WIP inventory minus direct materials transferred to finished goods. From the given information, we can calculate the beginning WIP inventory as $58,000, the direct materials transferred to finished goods as $10,500 and the ending WIP inventory as $12,500. We are also given that the direct labor cost incurred is 1.5 times the factory overhead, which means that the factory overhead is 2/3 of the direct labor cost. Using this information and the formula, we can calculate that the direct materials used is $31,000. Therefore, the best choice is C, $31,000.