Kayak Company uses a job order costing system and allocates its overhead on the basis of direct labor costs. Kayak Company's production costs for the year were: direct labor, $34,000; direct materials, $54,000; and factory overhead applied $6,400. The predetermined overhead rate was:

Question

Brendon Guzman

Business

24 July, 14:56

Kayak Company uses a job order costing system and allocates its overhead on the basis of direct labor costs. Kayak Company's production costs for the year were: direct labor, $34,000; direct materials, $54,000; and factory overhead applied $6,400. The predetermined overhead rate was:

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Answers (1)

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Layla Mullen · Answer 1

The predetermined overhead rate was 0.188235

Explanation:

In job order costing system cost only direct materials and direct labor cost are allocated to each order. Usually overhead is applied with rate, in this case related to direct labor costs. If factory overhead applied was $6,400 and direct labor was $34,000 the rate is $6,400/$34,000=0.188235

Sor for direct labor of $34,000 overhead to be applied would be $34,000*0.188235=$6,400