The accounting records of Omar Company contained the following information for l
ID: 2605115 • Letter: T
Question
The accounting records of Omar Company contained the following information for last year:
Beginning
Ending
Direct materials inventory........................
$9,000
$7,000
Work in process inventory.......................
$17,000
$31,000
Finished goods inventory........................
$10,000
$15,000
Manufacturing costs incurred
Direct materials used...............................
$72,000
Overhead applied.....................................
$24,000
Direct labor cost (10,000 hours)..............
$80,000
Depreciation.............................................
$10,000
Rent.........................................................
$12,000
Taxes........................................................
$8,000
Cost of goods sold...................................
$157,000*
*
Selling and administrative costs incurred
Advertising..............................................
$35,000
Rent.........................................................
$20,000
Clerical.....................................................
$25,000
*Does not include over- or underapplied overhead.
1. The amount of direct material purchased during the year was:
2. The total costs added to Work in Process during the year were:
Beginning
Ending
Direct materials inventory........................
$9,000
$7,000
Work in process inventory.......................
$17,000
$31,000
Finished goods inventory........................
$10,000
$15,000
Manufacturing costs incurred
Direct materials used...............................
$72,000
Overhead applied.....................................
$24,000
Direct labor cost (10,000 hours)..............
$80,000
Depreciation.............................................
$10,000
Rent.........................................................
$12,000
Taxes........................................................
$8,000
Cost of goods sold...................................
$157,000*
*
Selling and administrative costs incurred
Advertising..............................................
$35,000
Rent.........................................................
$20,000
Clerical.....................................................
$25,000
Explanation / Answer
Solution:
Part 1 -- The amount of direct material purchased during the year
Cost of Direct Material Used during the year = Beginning direct material inventory + Amount of Direct material purchased during the year – Ending direct material inventory
$72,000 = 9,000 + Amount of Direct material purchased during the year - $7,000
Amount of Direct material purchased during the year = 72,000 – 2,000 = $70,000
Hence, the amount of direct material purchased during the year = $70,000
Part 2 --- Total Costs added to Work In Process during the year
Direct materials used
$72,000
Direct labor cost
$80,000
Overhead applied
$24,000
Total Costs added to work in process during the year
$176,000
The correct answer $176,000
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Direct materials used
$72,000
Direct labor cost
$80,000
Overhead applied
$24,000
Total Costs added to work in process during the year
$176,000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.