Question

Vaughn Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2020, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $ 22,000 , direct labor $ 13,200 , and manufacturing overhead $ 17,600 . As of January 1, Job 49 had been completed at a cost of $ 99,000 and was part of finished goods inventory. There was a $ 16,500 balance in the Raw Materials Inventory account.
During the month of January, Vaughn Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were sold during the month. The following additional events occurred during the month.

1. Purchased additional raw materials of $109,800 on account.
2. Incurred factory labor costs of $85,400. Of this amount $19,520 related to employer payroll taxes.
3. Incurred manufacturing overhead costs as follows:

Idirect materials $20,740
Indirect labor $24,400
Depreciation expense on equipment $14,640
Other manufacturing overhead costs on account $19,520.

4. Assigned direct materials and direct labor to jobs as follows.

Job No. Direct Materials Direct Labor
50 $12,200 $6,100
51 47,580 30,500
52 36,600 24,400

Required:
Calculate the predetermined overhead rate for 2020, assuming Vaughn Company estimates total manufacturing overhead costs of $ 882,000, direct labor costs of $735,000, and direct labor hours of 21,000 for the year.

Answer 1

Answer:

$1.2

Explanation:

Predetermined overhead rate is the rate that is used to apply estimated overhead to job orders or products.

The predetermined overhead rate for 2020 is calculated as ;

= Estimated total manufacturing overhead costs / Estimated Direct labor cost

= $882,000 / $735,000

= $1.2

Therefore, the predetermined overhead rate for 2020 is $1.2