Asked by Akadiri Olalekan on May 08, 2024
Verified
For a particular period, Petersen's opening and closing work in process balances were $20 000 and $14 000 respectively. Direct materials used was $200 000 and overhead applied was $130 000. Cost of goods manufactured was $490 000. What was the amount of direct labour cost incurred for the period?
A) $148 000
B) $154 000
C) $160 000
D) $504 000
Work in Process Balances
Work in process balances refer to the value of materials and labor for products that are in the production process but not yet completed.
Direct Materials
Items that directly enter into the final product and can be easily traced and assigned to it.
Cost of Goods Manufactured
The total production cost of goods completed during a specific period, including materials, labor, and overhead.
- Acquire knowledge on the importance and application of direct labor costs in job costing.
Verified Answer
AD
Aaliyah DavisMay 12, 2024
Final Answer :
B
Explanation :
The direct labor cost can be calculated using the formula for Cost of Goods Manufactured (COGM): COGM = Opening Work in Process + Direct Materials + Direct Labor + Overhead - Closing Work in Process. Rearranging to solve for Direct Labor gives: Direct Labor = COGM - Opening Work in Process - Direct Materials - Overhead + Closing Work in Process. Plugging in the given values: Direct Labor = $490,000 - $20,000 - $200,000 - $130,000 + $14,000 = $154,000.
Learning Objectives
- Acquire knowledge on the importance and application of direct labor costs in job costing.