The ending inventory of finished goods has a total cost of $9,000 and consists of 600 units. If

the overhead applied to these goods is $3,000, and the overhead rate is 75% of direct labor, how

much direct materials cost was incurred in producing these units?

A. $3,750

B. $2,000

C. $4,000

D. $6,000

E. $9,000

B. $2,000

Explanation:

Given;

Total cost of ending inventory = $9,000

Total number of units = 600

Over heads cost = $3,000 and the overhead rate is 75% of direct labor

Let direct labour cost be y

75% * y = 3000

3y/4 = 3000

y = 4 * 3000/3

y = $4,000

Total Inventory cost = direct material cost + direct labour cost + overheads

9000 = direct material cost + 4000 + 3000

direct material cost = 9000 - 7000

= $2,000