The Work in Process controlling account of a manufacturing firm shows a debit balance of $5,000 at the end of an accounting period. The job cost sheet of the two uncompleted jobs shows charges of $700 and $1,300 for materials used and charges of $400 and $600 for direct labor used. From this information, it appears that the company is using a predetermined factory overhead rate (as a percentage of direct labor cost) of:
A) 100%.
B) 200%.
C) 33%.
D) 50%.

Question

Quizplus · Accepted Answer

The total direct labor cost is $400 + $600 = $1,000. The total materials cost is $700 + $1,300 = $2,000. The total cost in Work in Process is $5,000. The overhead applied is $5,000 - ($2,000 + $1,000) = $2,000. The overhead rate is $2,000 / $1,000 = 200%.

The Work in Process Controlling Account of a Manufacturing Firm