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5 January, 03:02

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:

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  1. 5 January, 03:46
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    The applied overhead rate as a percentage of Direct Labor Costs is 125 %

    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
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