Cost relationships; normal costing systemmcallister. incl employs a normal costing system. the following information pertains to the year just ended.- total manufacturing costs were $2,500,000.0 cost of goods manufactured was $2,425,000.0 applied manufacturing overhead was 30 percent of total manufacturing costs.0 manufacturing overhead was applied to production at a rate of 80 percent of direct-labor costs- work-in-process inventory on january 1 was 75 percent of work-in-process inventory on december 31.required: 1. compute the total direct-labor cost for the year.1 calculate the total cost of direct material used during the year.3. compute the value of the company's work-in-process inventory on december 31.

materials: 2,500,000 x (1 - 0.375 - 0.3) = $812,500

labor:         2,500,000 x 0.375 = $937,500

overhead: 2,500,000 x 0.300 = $750,000

ending inventory: $300,000

Explanation:

Total Cost =  materials + labor + overhead

Total Cost = materials + labor + 30%cost

overhead = 80% of labor

therefore, labor = 1.25 of Overhad

1.25 x 30% of cost = 37.5% of cost

Total cost = materials + .375 cost + 0.3 cost

(1 - 0.375 - 0.3) cost = materials

cost = 2,500,000

materials: 2,500,000 x (1 - 0.375 - 0.3) = 812,500

labor:         2,500,000 x 0.375 = 937,500

overhead: 2,500,000 x 0.300 = 750,000

cost of goods manufactured

beginning WIP

+ manufacturing cost

Ending WIP    

Cost of Good manufactured

75% of ending inventory

+ 2,500,000

ending Inventory

2,425,000

0.75X + 2,500,000 - X = 2,425,000

2,500,000 - 2,425,000 = 0.25X

X = 75,000 / 0.25 = 300,000

there was no passage listed but using the process of elimination i'd say it was d. the high economy would do the opposite. i don't see how low prices would affect it. high unemployment is possible but i feel d is the better answer.