A manufacturing company uses a job order cost accounting system.Overhead is applied using direct labor hours as an allocation base.Total costs for a particular job were $5,720.Of this amount $2,600 was direct labor and $1,040 was direct material.The company pays $26 per hour of direct labor and $2 per pound of direct materials.What is this company's overhead rate?

Question

Quizplus · Accepted Answer

DM + DL + OH = Total cost
$1,040 + $2,600 + OH = $5,720
OH = $2,080 applied overhead
Total DL cost / DL cost per hour = Number of DL hours
$2,600/ $26 = 100 direct labor hours
Predetermined overhead rate (POHR) x Allocation base = Applied overhead
POHR x 100 DL hours = $2,080
POHR = $2,080/100
POHR = $20.80 per DL hour

A Manufacturing Company Uses a Job Order Cost Accounting System