The Work in Process Inventory account of a manufacturing company has a $5,633 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 $2,300 and direct labor cost of $1,100. Therefore, the company's predetermined overhead rate is:

Question

Leticia Yates

Business

4 January, 02:32

The Work in Process Inventory account of a manufacturing company has a $5,633 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 $2,300 and direct labor cost of $1,100. Therefore, the company's predetermined overhead rate is:

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Answers (1)

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Phoebe Jacobs · Answer 1

overhead rate is 203 %

Explanation:

given data

debit balance = $5633

material cost = $2300

labor cost = $1100

to find out

overhead rate

solution

we calculate overhead rate by given formula that is

overhead rate = total overhead cost / labor cost ... 1

here total overhead cost = debit balance - material cost - labor cost

total overhead cost = 5633 - 2300 - 1100

total overhead cost = $2233

so from equation 1

overhead rate = total overhead cost / labor cost

overhead rate = $2233 / $1100

overhead rate = 2.03

so overhead rate = 203 %