The Work in Process Inventory account of a manufacturing company that uses an overhead rate based on direct labor cost has a $12,960 debit balance after all posting is completed. The cost sheet of the one job still in process shows direct material cost of $4,000 and direct labor cost of $2,800. Therefore, the company's overhead application rate is:

Question

Alannah Solomon

Business

27 January, 07:09

The Work in Process Inventory account of a manufacturing company that uses an overhead rate based on direct labor cost has a $12,960 debit balance after all posting is completed. The cost sheet of the one job still in process shows direct material cost of $4,000 and direct labor cost of $2,800. Therefore, the company's overhead application rate is:

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Hannah Abbott · Answer 1

Overhead rate = $4.63

Explanation:

Giving the following information:

The Work in Process Inventory account of a manufacturing company that uses an overhead rate based on direct labor cost has a $12,960 debit balance after all posting is completed.

The cost sheet of the one job still in process shows the direct material cost of $4,000 and a direct labor cost of $2,800.

Overhead rate = estimated total manufacturing overhead cost / total amount of allocation base

Overhead rate = 12960/2800 = $4.63

For every $ on direct labor, its allocated $4.63 of overhead.