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In: Accounting

The work in process inventory account of a manufacturing company that uses and overhead rate based...

The work in process inventory account of a manufacturing company that uses and overhead rate based on direct labor cost has a $9,873 debit balance after all posting is completed. The cost sheet of the one job still in process shows direct material cost of $3,300 and direct labor cost of $2,100. Therefore, the company's overhead application rate is:

A. 64% of direct labor cost

B. 136% of direct labor cost

c. 157% of direct labor cost

D. 213% of direct labor cost

E. 47% of direct labor cost

Solutions

Expert Solution

Answer: Option (D) is correct

Explanation:

Manufacturing overhead allocated to work in process = Total cost of Work in Process - Direct material cost - Direct labor cost

                                                                              = $9,873 - $3,300 - $2,100

                                                                              = $4,473

Therefore,

Overhead application rate = (Manufacturing overhead allocated to work in process / Direct labor cost) * 100%

                                        = ($4,473 / $2,100) * 100

                                       = 213%

ekkarill92 answered 2 months ago
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