Question

Doyle Co. uses a job order cost accounting system. At year-end the Work-in-Process Inventory controlling account showed a debit balance of $43,125. For the two jobs in process at year-end, one showed $6,000 in direct materials and $4,500 in direct labor. The job cost sheet for the second job showed $9,000 in direct materials and $6,750 in direct labor. If the company is using a predetermined overhead application rate based on direct labor cost, the rate is:

Answer 1

Answer:

150%

Explanation:

Overhead amount is divided by total direct labor cost * 100

Debit Balance - Direct Material - Direct Labor - Direct Material for second job - Direct Labor for second job

$43,125 - $6,000 - $4,500 - $9,000 - $6,750

= $16,875

Total direct labor cost is $11,250

$4,500 + $6,750

= $11,250

The predetermined overhead application rate is 150% Calculated as follows

($16,875 ÷ $11,250) × 100

= 150%