Question

The Work-in-Process inventory account of a manufacturing firm shows a balance of $4,620 at the end of an accounting period. The job cost sheets of two uncompleted jobs show charges of $610 and $410 for materials, and charges of $700 and $900 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of:

Answer 1

The applied overhead rate as a percentage of Direct Labor Costs is 125 %

Step-by-step explanation:

Computation of Predetermined overhead rate

Total value of work in Process $ 4,620

Less: Value of materials ( $ 610 + $ 410) $( 1,020)

Less: Direct labor costs ( $700 + $ 900) $ (1,600)

Remaining value represents Applied overhead $ 2,000

The applied overhead of $ 2000 on a Direct labor costs of $ 1,600 represents

$ 2000/ $ 1600 * 100 = 125 % of Direct labor costs