Kayak Company uses a job order costing system and allocates its overhead on the basis of direct labor costs. Kayak Company's production costs for the year were: direct labor, $29,000; direct materials, $49,000; and factory overhead applied $5,900. The predetermined overhead rate was: Multiple Choice
12.04%.
20.34%.
491.53%.
4.92%.
16.90%.
Answer: Option b. 20.34% |
Overhead cost are allocated on the basis of direct labor cost |
Predetermined overhead rate (%) = ( Facory overhead / Direct labor ) * 100 |
= ( $ 5,900 / $ 29,000 ) * 100 |
= 20.34% ( Rounded off to two decimal places ) |
Thus, Predetermined overhead rate is 20.34% |
Note: |
We can cross check our answer: |
Applied factory overhead = 20.34% of direct labor cost |
= 20.34% of $ 29,000 |
= $ 5,898.60 ( Difference due to rounding off overhead rate ) |
Get Answers For Free
Most questions answered within 1 hours.