Moonrise Bakery applies factory overhead based on direct labor costs. The company incurred the following costs during 2015: direct materials costs, $650,000; direct labor costs, $3,000,000; and factory overhead costs applied, $1,800,000.

Moonrise Bakery applies factory overhead based on direct labor costs. The company incurred the following costs during 2015: direct materials costs, $650,000; direct labor costs, $3,000,000; and factory overhead costs applied, $1,800,000.

Explanation:

2.
Factory overhead ($20,000 × 40%) = $12,000

3.

We also know that the total of direct labor costs (X) and factory overhead costs (0.6X) equals $240,000.  Thus, to get the individual amounts we need to solve: [X + 0.6X = $240,000]. The solution is:

Total cost of finished goods inventory = $490,000

Less: Direct materials = 250,000

Direct labor and factory overhead costs = $240,000

Direct labor costs = $150,000

Factory overhead costs = $150,000 × 0.6 = $90,000