Kingsway Company had the following information available for the past quarter:
$\begin{array}{ll}
\text { Budgeted factory overhead costs }&\$75,000\
\text { Actual factory overhead costs }&\$80,000\
\text { Budgeted direct labor hours } & 20,000 \
\text { Actural direct labor hours } &21,000
\end{array}$
Assume the cost driver for factory overhead costs is direct labor hours and a job uses 2,000 direct labor hours.The job was budgeted to use 2,100 direct labor hours.What amount of factory overhead is applied to the job?
A) $7,140
B) $7,500
C) $7,875
D) $8,000

Question

Quizplus · Accepted Answer

The factory overhead applied to the job is calculated using the predetermined overhead rate, which is based on the budgeted amounts. The predetermined overhead rate is calculated as Budgeted factory overhead costs / Budgeted direct labor hours = $75,000 / 20,000 hours = $3.75 per direct labor hour. For a job that uses 2,000 direct labor hours, the applied factory overhead is 2,000 hours * $3.75/hour = $7,500.

Kingsway Company Had the Following Information Available for the Past