Question

MC Qu. 116 CWN Company uses a job order costing... CWN Company uses a job order costing system and last period incurred $70,000 of actual overhead and $100,000 of direct labor. CWN estimates that its overhead next period will be $85,000. It also expects to incur $100,000 of direct labor. If CWN bases applied overhead on direct labor cost, its predetermined overhead rate for the next period should be:

Answer 1

85%

Step-by-step explanation:

With regards to the information above, predetermined overhead will be computed as;

Predetermined overhead = (Estimated overhead / Expected labor cost) × 100

Estimated overhead = $85,000

Expected labor cost = $100,000

Then,

Predetermined overhead = ($85,000 / $100,000) × 100

Predetermined overhead = 85%

Therefore, its predetermined overhead rate for the next period should be 85%