Question

A company incurred the following manufacturing costs this period: direct labor, $468,000; direct materials, $390,000; and factory overhead, $117,000. (1) Compute its Overhead Rate as a percent of direct labor.

Answer 1

Answer:

25%

Explanation:

Given that,

Direct labor = $468,000  

Direct materials = $390,000

Factory overhead = $117,000

The overhead rate as a percent of direct labor cost is determined by dividing the factory overhead by the direct labor cost.

Overhead rate:

= (Factory overhead ÷ Direct labor cost) × 100

= ($117,000 ÷ $468,000) × 100

= 0.25 × 100

= 25%