Bonita Industries applies overhead to production at a predetermined rate of 80% based on direct labor cost. Job No. 130, the only job still in process at the end of August, has been charged with manufacturing overhead of $5100. What was the amount of direct materials charged to Job 130 assuming the balance in Work in Process inventory is 45000?

Direct Materials                   $ 33525

Explanation:

Bonita Industries

Job No. 130,

Manufacturing overhead  $5100.

Direct Labor =  $ 6375

5100                    80

x                        100

Using cross product  direct labor = 5100 *100/80= 6375.

We have

Work in Process inventory  $ 45000

Less

Manufacturing overhead  $5100.

Direct Labor                        $ 6375        

Direct Materials                   $ 33525

The Work in Process is debited with Direct Materials, Direct Labor and Manufacturing Overheads.

As we know the Direct Labor and Manufacturing Overheads we can find out the Direct Materials by subtracting the Direct Labor and Manufacturing Overheads from the Work In Process Inventory balance.