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5 January, 09:08

Doyle Co. uses a job order cost accounting system. At year-end the Work-in-Process Inventory controlling account showed a debit balance of $43,125. For the two jobs in process at year-end, one showed $6,000 in direct materials and $4,500 in direct labor. The job cost sheet for the second job showed $9,000 in direct materials and $6,750 in direct labor.

If the company is using a predetermined overhead application rate based on direct labor cost, the rate is:

A. 50%.

B. 100%.

C. 150%.

D. 200%.

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Answers (1)
  1. 5 January, 09:11
    0
    C. 150%

    Explanation:

    The computation of the predetermined overhead application rate is shown below:

    = (Overhead amount : Total direct labor cost) * 100

    where,

    Overhead amount equals to

    = Debit balance - direct material 1 - direct labor 1 - direct material 2 - direct labor 2

    = $43,125 - $6,000 - $4,500 - $9,000 - $6,750

    = $16,875

    Total direct labor cost equal to

    = $4,500 + $6,750

    = $11,250

    So, the predetermined overhead application rate would be

    = ($16,875 : $11,250) * 100

    = 150%
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