Farber Corporation uses a job-order costing system.The information below is from the financial records of the company for last year: Applied overhead was 30% of total manufacturing costs.The Work in Process inventory at January 1 was 75% of the Work in Process inventory at December 31. Total cost of direct material used by Farber Corporation was:

Question

Farber Corporation uses a job-order costing system.The information below is from the financial records of the company for last year:  Applied overhead was 30% of total manufacturing costs.The Work in Process inventory at January 1 was 75% of the Work in Process inventory at December 31. Total cost of direct material used by Farber Corporation was:

Quizplus · Accepted Answer

Overhead applied = 0.30 × $2, 500, 000 = $750, 000
Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred
$750, 000 = 0.80 × Total direct labor cost
Total direct labor cost = $750, 000 ÷ 0.80 = $937, 500
Total manufacturing costs = Direct materials + Direct labor + Manufacturing overhead applied to work in process
$2, 500, 000 = Direct materials + $937, 500 + $750, 000
Direct materials = $2, 500, 000 - ($937, 500 + $750, 000)= 812, 500

Farber Corporation Uses a Job-Order Costing System