Question

The following balances have been taken from the general ledger for CCC Manufacturing Company:

Raw Materials Inventory (1-12-2014)

Rs. 40,000

Raw Material Purchases

190,000

Raw Materials Returns

9,000

Carriage Inwards

15,000

Direct Labor

250,000

Indirect Labor

60,000

Depreciation (Machinery)

30,000

Hear, Light and Power

25,000

Factory Rent and Taxes

31,000

Factory Repairs Expense

19,000

Foreman ‘s Salary

25,000

Raw Material (31-12-2014)

58,000

Work in Process (1-12-2014

63,000



The foreman estimates that Rs. 32,000 of Raw Materials and Rs. 25,000 of Direct Labor are to be allocated to the unfinished goods in process on 31-12-2014.



Determine the FOH Rate based on direct labor cost.

Answer 1

FOH rate based on direct labor cost is 22.8%.

Step-by-step explanation:

The computation of the factory overhead rate based on the direct labor cost is as follows:

Factory Overhead (FOH) Rate on Direct Labor Cost is

= Total Estimated Factory Overheads ÷ Direct Labor Cost × 100

= [$32,000 + $25,000] ÷ $250,000 × 100

= $57,000 ÷ $250,000 × 100

= 22.8%

Therefore, FOH rate based on direct labor cost is 22.8%.