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 two uncompleted jobs show charges of $400 and $200 for direct materials and charges of $300 and $500 for direct labour.From this information,what predetermined overhead rate,as a percentage of direct labour costs,does the company appear to be using?
A) 80%.
B) 125%.
C) 240%.
D) 300%.

Question

Quizplus · Accepted Answer

The total direct materials cost is $400 + $200 = $600, and the total direct labor cost is $300 + $500 = $800. The total cost of the uncompleted jobs is $600 + $800 = $1,400. Given the Work in Process inventory balance is $2,400, the overhead applied to these jobs is $2,400 - $1,400 = $1,000. The overhead rate as a percentage of direct labor costs is $1,000 / $800 = 125%.

The Work in Process Inventory Account of a Manufacturing Company