Question

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Moonrise Bakery applies factory overhead based on direct labor costs. The company incurred the following costs during 2015: direct materials costs, $650,000; direct labor costs, $3,000,000; and factory overhead costs applied, $1,800,000 Determine the company's predetermined overhead rate for year 2015. Answer is complete but not entirely correct. Choose Numerator: Total overhead costs 1,800,000 Overhead Rate Choose Denominator: Total direct labor costs 3,000 I - - - Overhead Rate Overhead rate 60.000% 2. Assuming that the company's $71,000 ending Work in Process Inventory account for year 2015 had $20,000 of direct labor costs, determine the inventory's direct materials costs. Answer is complete and correct. Total cost of work in process Inventory Less: Direct labor Less: Factory overhead Direct materials $ 71,000 20,000 12.000 $ 39,000 3. Assuming that the company's $490,000 ending Finished Goods Inventory account for year 2015 had $250,000 of direct materials costs, determine the inventory's direct labor costs and its overhead costs. Answer is complete but not entirely correct. $ Direct labor Factory overhead costs 490 000 X 250.000

Answer 1

1.

Overhead Rate
Choose Numerator	/	Choose Denominator	=	Overhead Rate
Total overhead costs	/	Total direct labor costs	=	Overhead Rate
$                 1,800,000	/	$                     3,000,000	=	60%

2.

This one is correct.

3.

Direct labor	$       150,000
Factory overhead costs	$         90,000

Total cost of finished goods inventory = 490,000
Less: Direct Materials = 250,000
Direct labor and factory overhead costs = 240,000

If Labor costs are X, factory overhead costs are 0.6X

X + 0.6X = 240,000
X = 240,000 / 1.6 = 150,000

Overhead costs = 150,000 X 0.6 = 90,000