Spencer Inc. applies overhead to production at a predetermined rate of 80% based on direct labor cost. Job No. 130 the only job still in process at the end of August has been charged with manufacturing overhead of $6400. What was the amount of direct materials charged to Job 130 assuming the balance in Work in Process inventory is $20000?

A) $7000.
B) $6400.
C) $5600.
D) $20000.

Work In Process Inventory

Items or goods in the production process but not yet completed; a stage between raw materials and finished goods.

Predetermined Rate

A rate established before the performance or production process begins, often used in costing to estimate or allocate costs.

Manufacturing Overhead

All manufacturing costs that are not directly related to the production of goods, including costs associated with running the factory such as utilities, maintenance, and factory equipment.