Calculation of Direct Materials Used

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Question:

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27 of 50 Concepts completed WarningDue in less than 8 hours Question Mode Multiple Choice Question Raw materials inventory was $27,000 at the beginning of the year and $25,000 at the end of the year. During the year, $100,000 in raw materials were purchased, including $28,000 of indirect materials that were put into manufacturing overhead during the period. Calculate the cost of direct materials used during the period.

Multiple choice question.

$130,000

$102,000

$74,000

$70,000

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Answer:

To calculate the cost of direct materials used during the period, we can use the following formula:

Direct Materials Used = Beginning Raw Materials Inventory + Purchases - Ending Raw Materials Inventory

  1. Beginning Raw Materials Inventory: $27,000
  2. Purchases: $100,000 (this includes both direct and indirect materials)
  3. Ending Raw Materials Inventory: $25,000

Now, we can calculate the total raw materials used:

Total Raw Materials Used = Beginning Inventory + Purchases - Ending Inventory

Total Raw Materials Used = $27,000 + $100,000 - $25,000
Total Raw Materials Used = $102,000

Next, we need to account for the indirect materials that were included in the purchases. The indirect materials amount to $28,000, which are not considered direct materials.

Direct Materials Used = Total Raw Materials Used - Indirect Materials

Direct Materials Used = $102,000 - $28,000
Direct Materials Used = $74,000

Therefore, the cost of direct materials used during the period is $74,000.

The correct answer is $74,000.