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10 July, 13:18

Using the following accounts and a predetermined overhead rate of 50% of direct labor cost, determine the amount of applied overhead.

Work in Process Inventory

Beginning WIP 23,000

Direct materials 69,000

Direct labor?

Applied overhead?

To finished goods?

Ending WIP 47,220

Finished Goods Inventory

Beginning FG 6,400

169,280

Ending FG

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  1. 10 July, 13:20
    0
    The amount of applied overhead is $41,500

    Explanation:

    Given,

    Beginning WIP - $ 23,000

    Direct materials - $69,000

    Ending WIP - $ 47,220

    Beginning FG - $6,400

    Ending FG - $169,280

    By using the above information, it is easy to calculate the direct labor. Through which, the computation of applied overhead become easy.

    The formula for computing direct labor is as follows:

    1.50 * Direct labor + Beginning WIP + Direct materials = Ending WIP + Ending FG

    1.50 * Direct labor + $ 23,000 + $69,000 = $ 47,220 + $169,280

    1.50 * Direct labor + $ 92,000 = $ 216,500

    1.50 * Direct labor = $ 216,500 - $ 92,000

    1.50 * Direct labor = $124,500

    Direct labor = $124,500 : 1.50

    Direct labor = $83,000

    Thus, the direct labor is $83,000

    The predetermined overhead rate of 50% of direct labor cost.

    So,

    Predetermined overhead rate = $83,000 * 50%

    = $41,500

    Thus, the amount of applied overhead is $41,500.

    Note : Since, the predetermined overhead rate of 50% of direct labor cost so we assume (1+0.50) 1.50 of direct labor because it is easy to calculate the predetermined overhead rate.
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