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Predetermined overhead

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The work-in-process inventory account of a manufacturing firm shows a balance of $3,000 at the end of the accounting period. The job cost sheets of two incomplete jobs show charges of $500 and $300 for materials, and charges of $400 and $600 for direct labor. From this information, it appears that the company is using a predetermined overhead application rate as a percentage of direct labor cost of:

a) 83%.
b) 120%.
c) 40%.
d) 300%.

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Solution Summary

This solution explains the response for the predetermined overhead application rate that a company is using, given various options for possible rates.

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