Question

Cosi Company uses a job order costing system and allocates its overhead on the basis of direct labor costs. Cosi expects to incur $900,000 of overhead during the next period, and expects to use 60,000 labor hours at a cost of $10.00 per hour. What is Cosi Company's overhead application rate

Answer 1

150%

Step-by-step explanation:

Calculation for overhead application rate

First step is to calculate the Total Direct labor cost

Total Direct Labor Cost = 60,000 hours * $10/hr Total Direct Labor Cost= $600,000

Last step is to calculate Overhead application rate

Overhead application rate = $900,000/$600,000

Overhead application rate = 1.5*100

Overhead application rate=150%

Therefore Cosi Company's overhead application rate is 150%