Franklin Company Franklin Company uses a job-order costing system.Assume that Job #309 is the only one in process.The following information is available:

Budgeted direct labor hours 72,000 Budgeted machine hours 11,000

Budgeted overhead $400,000 Direct material $122,750

Direct labor cost $80,000

Refer to Franklin Company.What is the overhead application rate if Franklin uses a predetermined overhead application rate based on direct labor hours (rounded to the nearest whole dollar)?

Question

Franklin Company Franklin Company uses a job-order costing system.Assume that Job #309 is the only one in process.The following information is available:

Budgeted direct labor hours	72,000	Budgeted machine hours	11,000
Budgeted overhead	$400,000	Direct material	$122,750
Direct labor cost	$80,000

Refer to Franklin Company.What is the overhead application rate if Franklin uses a predetermined overhead application rate based on direct labor hours (rounded to the nearest whole dollar)?

Quizplus · Accepted Answer

The predetermined overhead rate is computed by dividing the estimated total manufacturing overhead cost by the estimated total direct labor-hours. In this case, the estimated total manufacturing overhead cost is $101,640 ($58,800 + $36,000 + $6,840), and the estimated total direct labor-hours are 18,360. Therefore, the overhead application rate is $5.56 per direct labor-hour ($101,640/18,360), rounded to the nearest whole dollar.

Franklin Company Franklin Company Uses a Job-Order Costing System.Assume That Job #309