CWN Company uses a job order costing system and last period incurred $80,000 of actual overhead and $100,000 of direct labor.CWN estimates that its overhead next period will be $75,000.It also expects to incur $100,000 of direct labor cost.If CWN bases applied overhead on direct labor cost,its predetermined overhead rate for the next period should be:
A)75%.
B)80%.
C)107%.
D)125%.
E)133%.

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the estimated overhead costs by the estimated base (in this case, direct labor cost). So, $75,000 / $100,000 = 0.75 or 75%.

CWN Company Uses a Job Order Costing System and Last