Chapter 19, Problem 1MCQ

To determine

Ascertain the amount of overhead is applied to a job that requires total direct labor costs of $30,000.

Answer to Problem 1MCQ

c. $45,000.

Explanation of Solution

Overhead application rate:

Overhead application rate refers to device that is used by the business to apply to their normal amount of overhead cost to work in process inventory. Overhead application rate is predetermined during the beginning of the year and it is based on the estimated amount. Overhead application rate is computed as follows:

$\text{Overhead application rate}\text{=}\frac{\text{Estimated overhead costs}}{\text{Estimated units in the Activity Base}}$

Ascertain the amount of overhead is applied to a job that requires total direct labor costs of $30,000.

$\begin{array}{c}\text{Overhead cost applied to job =Total direct labor cost }\times \text{ Predertermined allocation rate}\\ \text{=\$30,000}\times \text{150\%}\\ \text{=\$45,000}\end{array}$

Therefore, for the above calculation it is observed that Option c. $45,000 is required to for a overhead to be applied to a job that requires a total direct labor costs of $30,000 and  others options a, b, d and e are incorrect answer.