The WIP inventory account of Oliver Manufacturing Inc shows a debit balance of $3,300 at the end of an accounting period. The job cost sheets of two uncompleted jobs show charges of $100 and $400 for direct materials and $600 and $200 for direct labour. What predetermined overhead rate, as a percentage of direct labour costs, is the company using?

Question

Quizplus · Accepted Answer

The total direct labor cost is $600 + $200 = $800. The total WIP is $3,300. The overhead is $3,300 - ($100 + $400 + $600 + $200) = $2,000. The overhead rate is ($2,000 / $800) * 100% = 250%.

The WIP Inventory Account of Oliver Manufacturing Inc Shows a Debit