Madtack Company's beginning and ending inventories for the month of November were as follows: Madtack applies manufacturing overhead cost to jobs at the rate of 70% of direct labor cost incurred. The company does not close underapplied or overapplied manufacturing overhead to Cost of Goods Sold until the end of the year.
-Madtack Company's total manufacturing cost for November was:

Question

Madtack Company's beginning and ending inventories for the month of November were as follows:  Madtack applies manufacturing overhead cost to jobs at the rate of 70% of direct labor cost incurred. The company does not close underapplied or overapplied manufacturing overhead to Cost of Goods Sold until the end of the year.
-Madtack Company's total manufacturing cost for November was:

Quizplus · Accepted Answer

Total direct material cost = Beginning inventory + Purchases - Ending inventory
= $95,000 + $385,000 - $80,000
= $400,000

Total direct labor cost = $200,000

Manufacturing overhead cost = 70% of direct labor cost = 0.7 x $200,000 = $140,000

Total manufacturing cost = Direct material cost + Direct labor cost + Manufacturing overhead cost
= $400,000 + $200,000 + $140,000
= $740,000

However, we need to adjust for the change in work in progress inventory during the month:

Beginning work in progress inventory = $0
Ending work in progress inventory = $105,000

Manufacturing cost incurred during the month = Total manufacturing cost - Ending work in progress inventory + Beginning work in progress inventory
= $740,000 - $105,000 + $0
= $635,000

Therefore, the total manufacturing cost for November was $510,000 (option B).

Madtack Company's Beginning and Ending Inventories for the Month of November