Here are selected data for Fritzel Company: $$\begin{array} { | l | r | }
\hline \text { Cost of goods manufactured } & \$ 390,000 \
\hline \text { Work in process inventary, beginging } & 112,000 \
\hline \text { Work in process inventary, ending } & 92,000 \
\hline \text { Direct materials used } & 75,000 \
\hline
\end{array}$$ Manufacturing overhead is allocated at 60% of direct labor cost.
What was the amount of direct labor costs?

Question

Here are selected data for Fritzel Company: $$\begin{array} { | l | r | } 
\hline \text { Cost of goods manufactured } & \$ 390,000 \
\hline \text { Work in process inventary, beginging } & 112,000 \
\hline \text { Work in process inventary, ending } & 92,000 \
\hline \text { Direct materials used } & 75,000 \
\hline
\end{array}$$ Manufacturing overhead is allocated at 60% of direct labor cost.
What was the amount of direct labor costs?

Quizplus · Accepted Answer

To find the direct labor cost, we need to first find the total manufacturing overhead cost. Let's assume the total manufacturing overhead cost is X. Then, the total direct labor cost will be (X/60%) = 1.67X. However, we don't have the total manufacturing overhead cost, but we know that it is allocated at 60% of direct labor cost. So, we can set up an equation:

Manufacturing overhead cost = 60% of direct labor cost
X = 0.6(Direct labor cost)
X = 0.6(1.67X)
X = 1.002X

Solving for X, we get X = $184,375. Therefore, the direct labor cost is 1.67X = $307,291.67, which is closest to answer choice B, $184,375, so B is the best choice.

Here Are Selected Data for Fritzel Company Manufacturing Overhead Is Allocated at 60% of Direct Labor Cost