[najma.ghaffar]

The payroll records of E.W grant co, shows payments for labour of 400000,of which 80000 is indirect labour, matarial reqisition shows 300000 for mat used of which 280000 represent d.matarial other manufacturing exp total 124000 finished goods on hand at the end of the periods are stated at cost 176000 of which 40000 is direct material cost factory over head is allocated on the basis of direct labour cost.
Required:
Determine the amount of direct labour and the amount of factory overhead in finished goods.

[rehmanvohra]

Manufacturing ovrheads:
Indirect Materials (300,000 - 280,000) 20,000
Indirect labour 80,000
Other expenses 124,000
Total 224,000

Overhead absorption rate: 224,000/320,000 = 70%

Cost of finished goods inventory 176,000
Materials cost (40,000)
Conversion costs 136,000

Since conversion costs are 100 for labour and 70 for overheads thus totalling to 170, therefore The labour costs will be 136,000/170 x 100 = 80,000 and overheads will be 56,000.