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9 August, 00:56

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:

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  1. 9 August, 03:46
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    The amount of overhead debited to Work in Process Inventory is $273,000

    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
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