A company's overhead rate is 200% of direct labor cost. Using the following incomplete accounts, determine the cost of direct materials used.

Question

Quizplus · Accepted Answer

The overhead rate is 200% of the direct labor cost, so the total cost is 300% of the direct labor cost. 
Let x be the direct labor cost. Then the total cost is 3x. 
We know that total costs = direct materials used + direct labor cost + manufacturing overhead. 
From the given accounts, we have 
Direct labor cost = $40,000 
Manufacturing overhead = $80,000 
Total costs = $210,000

Substituting these values in the equation, we get 
210,000 = direct materials used + 40,000 + 0.2 (40,000) 
Simplifying, we get 
Direct materials used = $65,000

A Company's Overhead Rate Is 200% of Direct Labor Cost