Question

Determine and Use Overhead Rate
Cortez Consulting, Inc., expects the following costs and expenses during the coming year:

Direct labor (@ $18/hr.)	$324,000
Sales commissions	74,000
Overhead	288,000

a. Compute a predetermined overhead rate applied on the basis of direct labor hours.

Round to two decimal places, if applicable.

$Answer

b. Prepare a general journal entry to apply overhead during an interim period when 3,000 direct labor hours were worked.

General Journal
Description	Debit	Credit
Answer	Answer	Answer
Answer	Answer	Answer

c. What amount of overhead would be assigned to Job 466, to which $360 in direct labor had been charged?

Round to two decimal places, if applicable.

$Answer

Answer 1

a. Direct labor hours = 324000 / 18 = 18000 labor hours

Predetermined Overhead Rate = $288000 / 18000 hours = $16 per DLH

b. Overhead applied on 3000 DLHs worked = 3000 * $16 = $48000

Journal Entry :

Debit Work in Process $48000

Credit Manufacturing Overhead $48000

(being 3000 direct labor hours used and overhead applied @ $16 per DLH)

c. Overhead assigned to Job 466 :

Direct labor hours used on Job 466 = $360 / $18 =20 hours

Overhead assigned = 20 hours * $16 = $320