If a firm applies its manufacturing overhead based on direct labor cost and estimates that for the coming year it will have expected total direct labor costs of $60,000 and total manufacturing overhead costs of $36,000, its overhead application rate will be 60 percent.

Question

Quizplus · Accepted Answer

To calculate the overhead application rate, the formula is:

Overhead application rate = Total manufacturing overhead costs / Total direct labor costs

Plugging in the given values:

Overhead application rate = $36,000 / $60,000 = 0.6 or 60%

Therefore, the answer is A.

If a Firm Applies Its Manufacturing Overhead Based on Direct