Asadi Company uses a job costing system and allocates overhead using an estimated overhead allocation rate based on direct labour hours. Information for 20x5 is as follows: Estimated Actual
Manufacturing overhead $166,500 $165,000
Direct labour hours 50,000 60,000
The overhead allocated to work in process during 20x5 before the year-end adjustment was:

Question

Quizplus · Accepted Answer

To calculate the overhead allocation rate, we divide the estimated manufacturing overhead by the estimated direct labour hours: $166,500 ÷ 50,000 DLH = $3.33 per DLH. Using this rate, we can allocate overhead to the work in process for 20x5: $3.33 per DLH x 60,000 actual DLH = $199,800. Therefore, the correct answer is A) $199,800.

Asadi Company Uses a Job Costing System and Allocates Overhead