If direct labor for the month is $30,000,overhead is applied based on direct labor,annual overhead is estimated to be $500,000,and annual direct labor is estimated to be $800,000,what is the entry to apply overhead to production?

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Quizplus · Accepted Answer

The overhead application rate is calculated as $500,000 / $800,000 = 0.625 or 62.5% of direct labor. Applying this rate to the $30,000 direct labor gives $30,000 * 0.625 = $18,750. The entry to apply overhead is to debit Work-in-Process Inventory and credit Overhead-Applied for $18,750.

If Direct Labor for the Month Is $30,000,overhead Is Applied