Question

The predetermined overhead rate for neutronics, inc. is 70% of direct labor cost. the company incurs $250,000 of factory labor costs during the month and $180,000 of that cost is direct labor and $70,000 is indirect labor. actual overhead incurred was $130,000. what should be the amount of overhead debited to work in process inventory?

Answer 1

Direct labor cost = $180,000

Indirect labor cost = $70,000

Labor cost = $250,000

Solution:

Amount to be debited = Direct labor cost * 70% 
Amount to be debited = $180,000 * 70% = $126,000 

So, the amount to be debited to work in progress inventory is $126,000

Answer 2

The amount that should be debited to work-in-progress inventory is $126,000.

Further Explanation:

Overhead:

Overhead refers to the business expenses that are not directly associated with the production but required in the production process of the product. The overhead are incurred to support the business activities for the undisturbed flow of the operating activities. The overhead does not include the direct costs of the production such as direct material and direct labor. There are majorly two types of overhead:

1. Manufacturing overhead
2. Administrative overhead

Calculate the work-in-progress inventory:

The work-in-progress inventory can be calculated by multiplying the overhead rate of 70% with the total direct labor cost which is $180,000. It will be the budgeted overhead cost.

$\begin{aligned}\text{Work-in-progress inventory}&=\text{Direct labor cost}\times{\text{Overhead rate}}\\&=\ 180,000\times{70\%}\\&=\ 126,000 \end{aligned}$

Thus, the amount that should be debited to work-in-progress inventory is $126,000.

Learn More:

1. Learn more about the variance brainly.com/question/3463210
2. Learn more about the demand brainly.com/question/11093180
3. Learn more about the marginal revenue brainly.com/question/11141271

Answer Details:

Grade: Middle school

Chapter: Overhead allocation  

Subject: Cost accounting

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