Question

The Work in Process Inventory account of a manufacturing company has a $4,400 debit balance. The company applies overhead using direct labor costs. The cost sheet of the only job still in the process shows the direct material cost of $2,000 and a direct labor cost of $800. Therefore, the company's predetermined overhead rate is:

Answer 1

The predetermined overhead rate cannot be determined with the given information because the total overhead and the basis for applying overhead are not provided; only the Work in Process Inventory balance, direct material cost, and direct labor cost are known.

Step-by-step explanation:

The Work in Process Inventory account of a manufacturing company has a debit balance of $4,400. To determine the company's predetermined overhead rate, we need the direct labor cost from the job still in process, which is $800. However, the information provided does not give us the actual overhead applied or the overhead rate but only the direct material cost of $2,000. Therefore, without additional information on the total overhead or the basis for applying the overhead (such as a percentage applied to the direct labor cost), we cannot calculate the predetermined overhead rate.

Answer 2

$2 per direct labor cost

Step-by-step explanation:

For computing the predetermined overhead rate, first we have to compute the manufacturing overhead which is shown below:

Manufacturing overhead = Work in Process Inventory amount - direct material cost - direct labor cost

= $4,400 - $2,000 - $800

= $1,600

Now the predetermined overhead rate would be

= Manufacturing overhead ÷ direct labor cost

= $1,600 ÷ $800

= $2 per direct labor cost