Dillon Corporation applies manufacturing overhead to jobs using a predetermined

Question

Dillon Corporation applies manufacturing overhead to jobs using a predetermined overhead rate of 75% of direct labor cost. Any under or overapplied manufacturing overhead cost is closed out to Cost of Goods Sold at the end of the month. During May, the following transactions were recorded by the company:

The amount of direct materials cost in the May 31 Work in Process inventory account was:

A: $7,600

B: $2,000

C: $6,300

D: $4,300

Raw materials (all direct materials) Purchased during the month Used in production $38,000 $35,000 Labor: 3,150 Direct labor-hours worked during the month Direct labor cost incurred $24,500 Manufacturing overhead cost incurred (total) Inventories Raw materials (all direct), May 31 Work in process, May 1 Work in process, May 31 $8,000 $9,000 ..$12,000* ……… ay 31 *Contains $4,400 in direct labor cost

Explanation / Answer

Work in Progress as on 31st May=$12,000-$4,400

                                                    =$7,600

The answer is option A

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