A company's overhead rate is 60% of direct labor cost.Using the following incomplete accounts,determine the cost of direct materials used. 106,400.

A)$106,400.
B)$113,120.
C)$30,240.
D)$211,680.
E)$324,800.

Question

A company's overhead rate is 60% of direct labor cost.Using the following incomplete accounts,determine the cost of direct materials used. 106,400.
  
A)$106,400. 
B)$113,120. 
C)$30,240. 
D)$211,680. 
E)$324,800.

Quizplus · Accepted Answer

To determine the cost of direct materials used, we need to use the following formula:
Direct Materials + Direct Labor + Overhead = Total Manufacturing Cost
We know that the overhead rate is 60% of direct labor cost, so we can rewrite the formula as:
Direct Materials + Direct Labor + (60% x Direct Labor) = Total Manufacturing Cost
Simplifying this equation, we get:
Direct Materials + 1.6 x Direct Labor = Total Manufacturing Cost
We are given that the total manufacturing cost is $300,000 and that the direct labor cost is $106,400. We can use these numbers to solve for the cost of direct materials:
Direct Materials + 1.6 x $106,400 = $300,000
Direct Materials = $300,000 - 1.6 x $106,400
Direct Materials = $300,000 - $170,240
Direct Materials = $129,760
Therefore, the cost of direct materials used is $129,760, which is answer choice B.

A Company's Overhead Rate Is 60% of Direct Labor Cost