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Capri Boat Corporation uses a job order cost system and applies overhead based on a percentage of direct labor cost.Cost flows through the Work in Process Inventory account during March are given below:
Only Job #007 was still in process at the end of March and this job had been charged with $40,000 in direct materials cost.
-The predetermined overhead application rate at Capri Boat is what percentage of direct labor costs?
A)38%
B)62%
C)260%
D)580%

Question

[The following information applies to the questions displayed below.]
Capri Boat Corporation uses a job order cost system and applies overhead based on a percentage of direct labor cost.Cost flows through the Work in Process Inventory account during March are given below:
  Only Job #007 was still in process at the end of March and this job had been charged with $40,000 in direct materials cost.
-The predetermined overhead application rate at Capri Boat is what percentage of direct labor costs?
A)38% 
B)62% 
C)260% 
D)580%

Quizplus · Accepted Answer

The predetermined overhead application rate is calculated as a percentage of direct labor costs, and when it is said to be 260%, it means that for every dollar of direct labor costs, an additional $2.60 is applied in overhead costs.

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