Mason Ltd uses a standard costing system. Overhead costs are allocated based on direct labor hours. The standard variable overhead and fixed overhead rates are $1 and $5 per direct labor hour, respectively. Data relevant for the current period include: The cost of direct materials added to work in process would be
A) $540,000
B) $585,000
C) $600,000
D) $650,000

Question

Quizplus · Accepted Answer

The problem does not provide the direct labor hours incurred during the current period, so the total overhead cost cannot be calculated. However, the problem provides the standard variable and fixed overhead rates, which together equal $6 per direct labor hour. The problem also provides the actual direct labor hours incurred during the current period, which are 100,000 hours. Therefore, the total overhead cost for the current period would be $600,000 (100,000 hours x $6 per hour). The problem also provides the cost of direct materials per unit, which is $18. Multiplying this by the 32,500 units of direct materials added to work in process during the current period results in a cost of $585,000 (32,500 units x $18 per unit). Therefore, the cost of direct materials added to work in process during the current period would be $585,000.

Mason Ltd Uses a Standard Costing System