Question

For Swifty Corporation, the predetermined overhead rate is 70% of direct labor cost. During the month, $600000 of factory labor costs are incurred of which $210000 is indirect labor. Actual overhead incurred was $370000. The amount of overhead debited to Work in Process Inventory should be:

Answer 1

The amount of overhead debited to Work in Process Inventory is $273,000

Step-by-step explanation:

Solution

Given that:

The predetermined overhead rate for Swiftly Corporation is = 70%

Factory labor cost incurred is =$600000

Indirect labor = $210000

The actual overhead incurred = $370000

Now

We solve for the amount of overhead debited to Work in Process Inventory which is calculated as follows:

The amount of overhead debited to Work in Process Inventory = (Factory labor cost - Indirect labor cost) * the overhead rate

= ($600000 -$ 210000) * 70%

= $390,000 * 70%

= $273,000