Hamilton Pty Ltd uses a standard costing system for product costing. The company uses direct labour hours as the cost driver to apply overhead costs. The following amounts were budgeted for the year:
The following were the actual results:
Calculate the amount of overhead cost applied to work in process inventory.
A) $1 520 000
B) $1 536 000
C) $1 550 000
D) $1 600 000

Question

Hamilton Pty Ltd uses a standard costing system for product costing. The company uses direct labour hours as the cost driver to apply overhead costs. The following amounts were budgeted for the year: 
The following were the actual results: 
Calculate the amount of overhead cost applied to work in process inventory.
A) $1 520 000 
B) $1 536 000 
C) $1 550 000 
D) $1 600 000

Quizplus · Accepted Answer

The amount of overhead cost applied to work in process inventory can be calculated as follows:
Actual direct labour hours = 40,000
Budgeted overhead cost / Budgeted direct labour hours = $1,600,000 / 80,000 = $20 per direct labour hour
Overhead cost applied = Actual direct labour hours x Budgeted overhead rate = 40,000 x $20 = $800,000
Therefore, the correct answer is B ($1,536,000).

Hamilton Pty Ltd Uses a Standard Costing System for Product