The Work in Process inventory account of a manufacturing company shows a balance of $2,400 at the end of an accounting period.The job cost sheets of the two uncompleted jobs show charges of $400 and $200 for direct materials,and charges of $300 and $500 for direct labour.From this information,it appears that the company is using a predetermined overhead rate,as a percentage of direct labour costs,of:
A) 80%.
B) 125%.
C) 240%.
D) 300%.

Question

Quizplus · Accepted Answer

The total direct labor cost is $300 + $500 = $800. The total direct materials cost is $400 + $200 = $600. The total cost in Work in Process is $2,400. The overhead cost is $2,400 - ($600 + $800) = $1,000. The predetermined overhead rate is ($1,000 / $800) * 100% = 125%.

The Work in Process Inventory Account of a Manufacturing Company