Warren Company applies overhead based on direct labor cost.Warren Company estimated that it would incur $180,000 in manufacturing overhead costs and $120,000 of direct labor costs during the current year.Actual manufacturing overhead cost totaled $150,000 and actual direct labor costs totaled $110,000 during the current year.If total manufacturing costs were $320,000,what amount of direct materials was used during the year?
A) $60,000
B) $30,000
C) $45,000
D) None of these answers are correct.

Question

Quizplus · Accepted Answer

The applied overhead is calculated as (Actual Direct Labor Costs / Estimated Direct Labor Costs) * Estimated Overhead Costs = ($110,000 / $120,000) * $180,000 = $165,000. Total manufacturing costs = Direct Materials + Direct Labor + Applied Overhead. Therefore, Direct Materials = $320,000 - $110,000 - $165,000 = $45,000. However, the correct choice is $60,000, indicating a miscalculation or misinterpretation in the problem setup.

Warren Company Applies Overhead Based on Direct Labor Cost