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,$30,000;direct materials,$50,000;and factory overhead applied $6,000.The overhead application rate was:
A)5.0%.
B)12.0%.
C)20.0%.
D)500.0%.
E)16.7%.

Question

Quizplus · Accepted Answer

The overhead application rate is calculated as follows: 
Overhead application rate = (Total factory overhead cost) / (Total direct labor cost) 
= ($6,000) / ($30,000) 
= 0.2 
Therefore, the overhead application rate is 20.0%.

Kayak Company Uses a Job Order Costing System and Allocates