Finished goods inventory is $190,000. If overhead applied to these goods is $72,000, and the overhead rate is 120% of direct labor, how much direct materials cost was incurred in producing the inventory?
A) $58,000.
B) $31,600.
C) $86,400.
D) $56,000.
E) $60,000.

Question

Quizplus · Accepted Answer

Overhead applied = 120% of direct labor$72,000 = 120% of direct laborDirect labor = $72,000 / 120% = $60,000Direct materials cost = Finished goods inventory - Overhead applied - Direct laborDirect materials cost = $190,000 - $72,000 - $60,000 = $58,000

Finished Goods Inventory Is $190,000