The following T-accounts have been constructed from last year's records at C&C Manufacturing: C&C Manufacturing uses job-order costing with a predetermined overhead rate and applies manufacturing overhead to jobs based on direct labor costs.What is the predetermined overhead rate?
A)125%
B)120%
C)100%
D)105%

Question

The following T-accounts have been constructed from last year's records at C&C Manufacturing:      C&C Manufacturing uses job-order costing with a predetermined overhead rate and applies manufacturing overhead to jobs based on direct labor costs.What is the predetermined overhead rate?
A)125% 
B)120% 
C)100% 
D)105%

Quizplus · Accepted Answer

Entry (b)refers to materials from the Raw Materials account.Entry (c)in the Manufacturing Overhead account must refer to indirect labor because the corresponding entry in the Work In Process account must be for direct labor.Entry (c)could not be for manufacturing overhead because there would be no entry in Work In Process.Therefore,entry (c)must be for direct and indirect labor.The direct labor must be $154,000 and the manufacturing overhead applied is the $192,500 credit entry (e)in the Manufacturing Overhead account.Therefore,
Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred
$192,500 = Predetermined overhead rate × $154,000
Predetermined overhead rate = $192,500 ÷ $154,000 = 1.25

The Following T-Accounts Have Been Constructed from Last Year's Records