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24 December, 12:50

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, $27,000; direct materials, $47,000; and factory overhead applied $5,700. The overhead application rate was:

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  1. 24 December, 15:31
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    21.11%

    Explanation:

    The computation of the overhead application rate is shown below:

    As we know that

    Overhead application rate = Factory overhead applied : direct labor cost

    = $5,700 : $27,000

    = 21.11%

    By dividing the factory overhead applied by the direct labor cost we can get the factory overhead rate and the same is to be shown in the computation part
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