The Work in Process inventory account of a manufacturing company shows a balance of $2,400 at the end of an accounting period. The job cost sheets of the two uncompleted jobs show charges of $400 and $200 for direct materials, and charges of $300 and $500 for direct labor. From this information, it appears that the company is using a predetermined overhead rate, as a percentage of direct labor costs, of:
a. 80%
Selected: b. 125% This answer is correct.
c. 300%
d. 240%
Correct! @ 400 + 200 + 300 + 500 + Manufacturing Overhead = 2,400. Manufacturing Overhead = 1,000. Direct labor = 300 + 500 = 800. Predetermined overhead rate = Manufacturing overhead / Direct labor = 125%.