CWN Company uses a job order costing system and last period incurred $89,000 of actual overhead and $100,000 of direct labor. CWN estimates that its overhead next period will be $66,000. It also expects to incur $100,000 of direct labor. If CWN bases applied overhead on direct labor cost, its predetermined overhead rate for the next period should be:

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Business

Jasper

27 August, 11:27

CWN Company uses a job order costing system and last period incurred $89,000 of actual overhead and $100,000 of direct labor. CWN estimates that its overhead next period will be $66,000. It also expects to incur $100,000 of direct labor. If CWN bases applied overhead on direct labor cost, its predetermined overhead rate for the next period should be:

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Clay Mosley · Answer 1

Predetermined overhead rate for the next period is $0.66 per $1 of labor cost

Explanation:

Predetermined overhead rate is calculated by dividing the Expected overhead by the Expected level of activity on which the overhead is applied. It is a rate at which the overhead is applied to a product / project / department.

Predetermined overhead rate = Expected overhead / Expected activity

Predetermined overhead rate = Expected overhead / Expected direct labor cost

Predetermined overhead rate = $66,000 / $100,000

Predetermined overhead rate = $0.66 per $1 of labor cost