Question

Lorenzo Company applies overhead to jobs on the basis of direct materials cost. At year-end, the Work in Process Inventory account shows the following Work in Process Inventory Date Explanation Debit Credit Dec. 31 Direct materials cost 1,400,000 31 Direct labor cost 260,000 31 Overhead applied 448,000 31 To finished goods 2,016,000 Balance 1,400,000 1,650,000 2,108,000 92,000 1. Determine the predetermined overhead rate used based on direct materials cost). 2. Only one job remained in work in process inventory at December 31. Its direct materials cost is $27.000. How much direct labor cost and overhead cost are assigned to this job?

Answer 1

Required 1:
Overhead rate
Choose numerator:	/	Choose denominator :	=	Overhead rate
Overhead costs	/	Direct materials cost	=	Overhead rate
448000	/	1400000	=	32%

Required 2 :
Total cost of job in process	92000
Less: Materials cost of job in process	27000
Less: Overhead applied [ 32% * 27000 ]	8640
Direct labor cost	56360