CWN Company uses a job order costing system and last period incurred $89,000 of actual overhead and $100,000 of direct labor. CW
N estimates that its overhead next period will be $66,000. It also expects to incur $100,000 of direct labor. If CWN bases applied overhead on direct labor cost, its predetermined overhead rate for the next period should be:
Predetermined overhead rate for the next period is $0.66 per $1 of labor cost
Explanation:
Predetermined overhead rate is calculated by dividing the Expected overhead by the Expected level of activity on which the overhead is applied. It is a rate at which the overhead is applied to a product / project/ department.
