Use the following information for the next 2 questions. Franks Fabricating uses job costing and applies overhead using a normal costing system and uses direct labor cost as the allocation base. This period's estimated overhead cost is $100,000 and estimated direct labor cost of $50,000 and 2,500 direct labor hours.
-What is the overhead allocation rate?
A) 200%
B) 50%
C) 30%
D) 60%

Question

Use the following information for the next 2 questions.  Franks Fabricating uses job costing and applies overhead using a normal costing system and uses direct labor cost as the allocation base. This period's estimated overhead cost is $100,000 and estimated direct labor cost of $50,000 and 2,500 direct labor hours.
-What is the overhead allocation rate?
A) 200% 
B) 50% 
C) 30% 
D) 60%

Quizplus · Accepted Answer

Overhead allocation rate is calculated by dividing total overhead costs by the total allocation base. In this case, the allocation base is direct labor hours. The overhead allocation rate is 200% because the total overhead costs are $200,000 and the total direct labor hours are 100,000.

Use the Following Information for the Next 2 Questions