The Work in Process inventory account of a manufacturing firm shows a balance of $3,000 at the end of an accounting period.The job cost sheets of two uncompleted jobs show charges of $500 and $300 for direct materials,and charges of $400 and $600 for direct labor.From this information,it appears that the company is using a predetermined overhead rate,as a percentage of direct labor costs,of:
A)83%
B)120%
C)40%
D)300%

Question

Quizplus · Accepted Answer

Work-in-Process = Direct materials + Direct labor + Manufacturing overhead applied
$3,000 = ($500 + $300)+ ($400 + $600)+ Manufacturing overhead applied
$1,200 = Manufacturing overhead applied
Manufacturing overhead applied = Predetermined overhead rate F1F1F1S1F1F1F10 Direct labor cost
Predetermined overhead rate = Manufacturing overhead applied F1F1F1S1F1F1F10 Direct labor cost
= $1,200 F1F1F1S1F1F1F10 $1,000 direct labor cost
= 120% of direct labor cost

The Work in Process Inventory Account of a Manufacturing Firm