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8 June, 14:22

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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  1. 8 June, 17:30
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    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 %
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