Question

Dixboro Company manufactures one product and accounts for costs using a job cost system. You have obtained the following information from the corporation’s books and records for the fiscal year ended May 31, year 1:

Total manufacturing cost during the year was $18,000,000 based on actual direct material, actual direct labor, and applied manufacturing overhead.

Manufacturing overhead was applied to work in process at 150 percent (1.5 times) direct labor dollars. Applied manufacturing overhead for the year was 30 percent of the total manufacturing cost during the year.

Required:

Compute actual direct material used, actual direct labor, and applied manufacturing overhead. (Hint: The total of these costs is $18,000,000.)

Direct Material Used:

Direct Labor:

Manufacturing Overhead Applied

Answer 1

Solution:

Working Notes:

(1): Computation of Manufacturing Overhead Applied -

Given data - Manufacturing Overhead Applied 30% of Total Manufacturing Overhead .

Manufacturing Overhead Applied = Total Manufacturing Overhead * 30%

= $18,000,000*30%

= $54,00,000

Therefore Manufacturing Overhead Applied = $54,00,000 .

(2):Computation of Direct Labor Cost -

Given data - Manufacturing Overhead Applied is 1.5 times of Direct labor cost

Direct Labor cost = Manufacturing Overhead Applied / 1.5

=$54,00,000/1.5

=$36,00,000

Therefore Direct Labor Cost = $36,00,000 .

(3) :Computation of Direct Material Used -

Formula :

Total Manufacturing Cost = Direct Material Used +Direct Labor Cost +Manufacturing OH Applied

$18,000,000 = Direct Material Used + $36,00,000 + $54,00,000

  Direct Material Used = $18,000,000-$36,00,000-$54,00,000

= $90,00,000

Therefore Direct Material Used = $90,00,000 .