Adams Manufacturing allocates overhead to production on the basis of direct labor costs.At the beginning of the year,Adams estimated total overhead of $396,000;materials of $410,000 and direct labor of $220,000.During the year Adams incurred $418,000 in materials costs,$413,200 in overhead costs and $224,000 in direct labor costs.Compute the overhead application rate.
A)180%.
B)55.6%.
C)186%.
D)184%.
E)96.6%.

Question

Quizplus · Accepted Answer

The overhead application rate is calculated by dividing the estimated total overhead by the estimated direct labor costs. So, $396,000 / $220,000 = 1.8 or 180%.

Adams Manufacturing Allocates Overhead to Production on the Basis of Direct