A company's overhead rate is 60% of direct labor cost. Using the following incomplete accounts, determine the cost of direct materials used.
A) $106,400.
B) $113,120.
C) $30,240.
D) $211,680.
E) $324,800.

Question

Quizplus · Accepted Answer

We need to use the formula:
Total Manufacturing Cost = Direct Materials Used + Direct Labor Cost + Manufacturing Overhead
And we know that:
Manufacturing Overhead = 60% x Direct Labor Cost
Let's fill in the numbers we have:
Direct Labor Cost = $56,560
Manufacturing Overhead = 60% x $56,560 = $33,936
Total Manufacturing Cost = $226,120
Now we can solve for Direct Materials Used:
Direct Materials Used = Total Manufacturing Cost - Direct Labor Cost - Manufacturing Overhead
Direct Materials Used = $226,120 - $56,560 - $33,936
Direct Materials Used = $113,120
Therefore, the answer is B.

A Company's Overhead Rate Is 60% of Direct Labor Cost