Final answer:
The predetermined overhead rate is 120%, calculated by dividing the overhead costs of $1,200 by the total direct labor cost of $1,000 and then multiplying by 100%.
Step-by-step explanation:
The subject of this question is Business, specifically dealing with Work in Process inventory and the calculation of a predetermined overhead rate.
In the given scenario, Work in Process inventory has a balance of $3,000 at the end of an accounting period. There are two uncompleted jobs with material and direct labor charges as follows: Job 1 has $500 for materials and $400 for direct labor, and Job 2 has $300 for materials and $600 for direct labor. The total direct labor cost is $400 + $600 = $1,000. To find the predetermined overhead rate, we need to calculate the portion of the total Work in Process inventory balance that consists of overhead. The sum of direct materials and direct labor costs for both jobs is $500 + $300 + $400 + $600 = $1,800. This means the overhead is the remaining balance, which is $3,000 - $1,800 = $1,200.
With a total direct labor cost of $1,000 and overhead costs of $1,200, the predetermined overhead rate as a percentage of direct labor costs is calculated as ($1,200 ÷ $1,000) × 100%, which equals 120%.