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

Overhead rate per direct labour hour = Budgeted overhead costs / Budgeted direct labour hours
= $1 500 000 / 150 000 hours
= $10 per direct labour hour

Overhead cost applied to work in process inventory = Actual direct labour hours x Overhead rate per direct labour hour
= 153 600 hours x $10 per direct labour hour
= $1 536 000

Therefore, the correct answer is B.

Hamilton Pty Ltd Uses a Standard Costing System for Product