Mountain View Manufacturers Inc.has estimated total factory overhead costs of $90,000,and 15,000 direct labor hours for the current fiscal year.If job number 112 incurred 1,000 direct labor hours,the work-in-process account will be increased and factory overhead will be decreased by:

Question

Quizplus · Accepted Answer

The predetermined overhead rate can be calculated by dividing the estimated total factory overhead costs by the estimated total direct labor hours:
Predetermined overhead rate = Estimated total factory overhead costs / Estimated total direct labor hours
Predetermined overhead rate = $90,000 / 15,000 direct labor hours
Predetermined overhead rate = $6 per direct labor hour

If job number 112 incurred 1,000 direct labor hours, then the overhead applied to that job would be:
Overhead applied = Predetermined overhead rate x Direct labor hours
Overhead applied = $6 per direct labor hour x 1,000 direct labor hours
Overhead applied = $6,000

The work-in-process account will be increased by $6,000, and factory overhead will be decreased by $6,000, since the applied overhead reduces the balance in the factory overhead account. Therefore, the correct answer is option C.