Cherry Hill Glass Company employs a normal costing system. The following information pertains to the year just ended.
• Total manufacturing costs were $1,420,000.
• Cost of goods manufactured was $1,391,000.
• Applied manufacturing overhead was 20 percent of total manufacturing costs.
• Manufacturing overhead was applied to production at a rate of 80 percent of direct-labor cost.
• Work-in-process inventory on January 1 was 75 percent of work-in-process inventory on December 31.
a) Calculate the total cost of direct-material used during the year.
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Cherry Hill Glass Company uses a normal costing system. The following information pertains to the year just ended.
· Total manufacturing costs added during the period were $1,250,000.
· Cost of goods manufactured was $1,212,500.
· Allocated manufacturing overhead was 30% of total manufacturing costs added during the period.
· Manufacturing overhead was allocated to production at a rate of 80% of direct labor cost.
· Work-in-process inventory on January 1 was 75% of work-in-process inventory on December 31.
Calculate the total cost of direct material used during the year.
To calculate the total cost of direct materials used during the year, we need to use the information given and follow these steps:
Step 1: Calculate the applied manufacturing overhead:
Applied manufacturing overhead = 20% * Total manufacturing costs
Applied manufacturing overhead = 0.2 * $1,420,000
Applied manufacturing overhead = $284,000
Step 2: Calculate the direct labor cost:
Direct labor cost = Cost of goods manufactured / (1 + Applied manufacturing overhead rate)
Direct labor cost = $1,391,000 / (1 + 0.8)
Direct labor cost = $1,391,000 / 1.8
Direct labor cost = $772,777.77 (rounded to the nearest penny)
Step 3: Calculate the direct material cost:
Direct material cost = Total manufacturing costs - (Applied manufacturing overhead + Direct labor cost)
Direct material cost = $1,420,000 - ($284,000 + $772,777.77)
Direct material cost = $1,420,000 - $1,056,777.77
Direct material cost = $363,222.23
Therefore, the total cost of direct materials used during the year is $363,222.23.