Worrell Corporation has a job-order costing system.The following debits (credits)appeared in the Work in Process account for the month of March:
$\begin{array}{l}
\begin{array}{lll}
\text { March 1, balance }\
\text { March } 31^{s t} \text {, direct materials }\
\text { March }3^{s t}\text {, direct labour. }\
\text {March 31, manufacturing overhead applied. }\
\text {March 31 , to finished goods.}
\end{array}
\begin{array}{lll}
12,000 \
40,000 \
30,000 \
27,000 \
(100,000)
\end{array}
\end{array}$
Worrell applies overhead at a predetermined rate of 90% of direct labour cost.Job No.232,the only job still in process at the end of March,has been charged with manufacturing overhead of $2,250.What was the amount of direct materials charged to Job No.232?

Question

Worrell Corporation has a job-order costing system.The following debits (credits)appeared in the Work in Process account for the month of March: 
$\begin{array}{l}
\begin{array}{lll}
\text { March 1, balance }\
\text { March } 31^{s t} \text {, direct materials }\
\text { March }3^{s t}\text {, direct labour. }\
\text {March 31, manufacturing overhead applied. }\
\text {March 31 , to finished goods.}
\end{array}
\begin{array}{lll}
12,000 \
40,000 \
30,000 \
27,000 \
(100,000)
\end{array}
\end{array}$
Worrell applies overhead at a predetermined rate of 90% of direct labour cost.Job No.232,the only job still in process at the end of March,has been charged with manufacturing overhead of $2,250.What was the amount of direct materials charged to Job No.232?

Quizplus · Accepted Answer

The total manufacturing overhead applied during the month is $27,000, which means that direct labour cost for the month must have been $30,000 ($27,000 ÷ 0.9). Direct materials cost can be calculated by subtracting the direct labour cost and the manufacturing overhead applied from the total debits to Work in Process:
$12,000 + $40,000 + $30,000 + $27,000 – $2,250 - $100,000 = $7,750
Therefore, the amount of direct materials charged to Job No. 232 must be:
$7,750 - ($30,000 + $2,250) = $5,500
Therefore the correct choice is C) $4,250

Worrell Corporation Has a Job-Order Costing System Worrell Applies Overhead at a Predetermined Rate of 90% of in the Work