Question

The Work in Process Inventory account of a manufacturing company has a $11,625 debit balance. The company applies overhead using direct labor cost. The cost sheet of the only job still in process shows direct material cost of $3,700 and direct labor cost of $2,500. Therefore, the company's predetermined overhead rate is:

Answer 1

The multiple choices are given below:

217%.

148%.

68%.

147%.

46%.

The correct option is 217%

Step-by-step explanation:

Overhead applied can be determined using the below formula total cost formula:

The total cost of work-in-process inventory=direct material cost+direct labor cost+overhead applied

total cost of work-in-process is $11,625

direct material cost is $3,700

direct labor cost is $2,500

overhead applied is the unknown

$11,625=$3,700+$2,500+overhed applied

$11,625=$6200+overhead applied

overhead applied=$11,625-$6,200=$5,425.00

predetermined overhead rate=overhead applied/labor cost=$5,425.00/$2,500.00=217%