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2 April, 10:10

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:

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  1. 2 April, 10:23
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    The multiple choices are given below:

    217%.

    148%.

    68%.

    147%.

    46%.

    The correct option is 217%

    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%
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