If the predetermined overhead allocation rate is 225% of direct labor cost and the Mixing Department's direct labor cost for the reporting period is $10,000,the following entry would be made to record the allocation of overhead to the products processed in this department:
$\begin{array}{llr}
\text { Goods in Process Inventory, Mixing Dept } &225,000\
\text { Factory Overhead } &&225,000\
\end{array}$

Question

If the predetermined overhead allocation rate is 225% of direct labor cost and the Mixing Department's direct labor cost for the reporting period is $10,000,the following entry would be made to record the allocation of overhead to the products processed in this department:
 $\begin{array}{llr}
  \text { Goods in Process Inventory, Mixing Dept  } &225,000\
 \text { Factory Overhead } &&225,000\
\end{array}$

Quizplus · Accepted Answer

The correct overhead allocation would be $22,500, not $225,000, because 225% of $10,000 is $22,500.