Answer (B) is correct . Factory overhead is 30% of total manufacturing costs, or $750,000. Direct labor is $937,500 (750,000 ¡Â 0.8). Thus, raw materials must account for the remaining $812,500 ($2,500,000 - $750,000 - $937,500).Answer (A) is incorrect because The amount of $750,000 is factory overhead (30% ¡Á $2,500,000).
Answer (C) is incorrect because The amount of $937,500 is the direct labor cost.
Answer (D) is incorrect because The amount of $1,150,000 is calculated using a direct labor cost of $600,000, which is incorrectly calculated by multiplying, instead of dividing, factory overhead by 80%. |
Total cost of direct material used by Farber Company for the year is