Question

The Work in Process Inventory account of a manufacturing company that uses an overhead rate based on direct labor cost has a $12,960 debit balance after all posting is completed. The cost sheet of the one job still in process shows direct material cost of $4,000 and direct labor cost of $2,800. Therefore, the company's overhead application rate is:

Answer 1

Overhead rate= $4.63

Step-by-step explanation:

Giving the following information:

The Work in Process Inventory account of a manufacturing company that uses an overhead rate based on direct labor cost has a $12,960 debit balance after all posting is completed.

The cost sheet of the one job still in process shows the direct material cost of $4,000 and a direct labor cost of $2,800.

Overhead rate= estimated total manufacturing overhead cost/ total amount of allocation base

Overhead rate= 12960/2800= $4.63

For every $ on direct labor, its allocated $4.63 of overhead.